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What changed in Hilltop Holdings Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Hilltop Holdings Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+572 added−584 removedSource: 10-K (2025-02-14) vs 10-K (2024-02-14)

Top changes in Hilltop Holdings Inc.'s 2024 10-K

572 paragraphs added · 584 removed · 469 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

89 edited+21 added−3 removed204 unchanged
Biggest changeThese self-regulatory organizations adopt rules (which are subject to approval by the SEC) for governing its members and the industry. Broker-dealers are also subject to federal securities laws and SEC rules, as well as the laws and rules of the states in which a broker-dealer conducts business.
Biggest changeBroker-dealers are also subject to federal securities laws and SEC rules, as well as the laws and rules of the states in which a broker-dealer conducts business. While the SEC, the states, and the exchanges may conduct regulatory examinations, the Hilltop Broker-Dealers are members of, and are primarily subject to regulation, supervision and regular examination by FINRA.
An increase in mortgage interest rates tends to result in decreased loan origination volume from refinancings, while a decrease in mortgage interest rates tends to result in increased loan origination volume from refinancings.
A decrease in mortgage interest rates tends to result in increased loan origination volume from refinancings, while an increase in mortgage interest rates tends to result in decreased loan origination volume from refinancings.
References in this Annual Report to applicable statutes and regulations are brief summaries thereof, do not purport to be complete, and are qualified in their entirety by reference to such statutes and regulations. ​ 12 Table of Contents The Dodd-Frank Act, which significantly altered the regulation of financial institutions and the financial services industry, established the Consumer Financial Protection Bureau (“CFPB”) and requires the CFPB and other federal agencies to implement many provisions of the Dodd-Frank Act.
References in this Annual Report to applicable statutes and 12 Table of Contents regulations are brief summaries thereof, do not purport to be complete, and are qualified in their entirety by reference to such statutes and regulations. ​ The Dodd-Frank Act, which significantly altered the regulation of financial institutions and the financial services industry, established the Consumer Financial Protection Bureau (“CFPB”) and requires the CFPB and other federal agencies to implement many provisions of the Dodd-Frank Act.
Compliance with the final rule began January 1, 2021, however, banking entities were allowed to voluntarily comply with the final rule in whole or in part prior to the compliance date, subject to the agencies’ completion of necessary technological changes. ​ In July 2020, the federal banking agencies published a final rule to streamline and improve the covered funds provisions of the Volcker Rule by making the following changes: permitting the activities of qualifying foreign excluded funds; revising the exclusions from the definition of “covered fund” for foreign public funds, loan securitizations, public 17 Table of Contents welfare investments and small business investment companies; creating new exclusions from the definition of “covered fund” for credit funds, qualifying venture capital funds, family wealth management vehicles, and customer facilitation vehicles; permitting certain transactions that could otherwise be prohibited under affiliate transaction restrictions unique to the Volcker Rule; modifying the definition of “ownership interest”; and providing that certain investments made in parallel with a covered fund, as well as certain restricted profit interests held by an employee or director, need not be included in a banking entity’s calculation of its ownership interest in the covered fund. ​ While management continues to assess compliance with the Volcker Rule, we have reviewed our processes and procedures in regard to proprietary trading and covered funds activities and we believe we are currently complying with the provisions of the Volcker Rule.
Compliance with the final rule began January 1, 2021, however, banking entities were allowed to voluntarily comply with the final rule in whole or in part prior to the compliance date, subject to the agencies’ completion of necessary technological changes. ​ In July 2020, the federal banking agencies published a final rule to streamline and improve the covered funds provisions of the Volcker Rule by making the following changes: permitting the activities of qualifying foreign excluded funds; revising the exclusions from the definition of “covered fund” for foreign public funds, loan securitizations, public welfare investments and small business investment companies; creating new exclusions from the definition of “covered fund” for credit funds, qualifying venture capital funds, family wealth management vehicles, and customer facilitation vehicles; permitting certain transactions that could otherwise be prohibited under affiliate transaction restrictions unique to the Volcker Rule; modifying the definition of “ownership interest”; and providing that certain investments made in 17 Table of Contents parallel with a covered fund, as well as certain restricted profit interests held by an employee or director, need not be included in a banking entity’s calculation of its ownership interest in the covered fund. ​ While management continues to assess compliance with the Volcker Rule, we have reviewed our processes and procedures in regard to proprietary trading and covered funds activities and we believe we are currently complying with the provisions of the Volcker Rule.
The retail group acts as a securities broker for retail customers in the purchase and sale of securities, options, and futures contracts that are traded on various exchanges or in the over-the-counter market through our employee-registered representatives or independent contractor arrangements. We extend margin credit on a secured basis to our retail customers in order to facilitate securities transactions.
The retail group acts as a securities broker for retail customers in the purchase and sale of securities, options, and futures contracts that are traded on various exchanges or in the over-the-counter market through our employee-registered representatives or independent contractor arrangements. We extend margin credit on a secured basis to our retail customers to facilitate securities transactions.
In addition, the Hilltop Broker-Dealers are operating subsidiaries of Hilltop, which means their activities are further limited by those that are permissible for financial holding companies and subsidiaries of financial holding companies, and as a result, the Hilltop Broker-Dealers and Hilltop may be prevented from entering new businesses that may be profitable in a timely manner, if at all. ​ Net Capital Requirements .
In addition, the Hilltop Broker-Dealers are operating subsidiaries of Hilltop, which means their activities are further limited by those that are permissible for financial holding companies and subsidiaries of financial holding companies, and as a result, the Hilltop Broker-Dealers and Hilltop may be prevented from entering into new businesses that may be profitable in a timely manner, if at all. ​ Net Capital Requirements .
PrimeLending offers a variety of loan products catering to the specific needs of borrowers seeking purchase or refinancing options, including 30-year and 15-year fixed rate conventional mortgages, adjustable rate mortgages, jumbo loans, new construction loans, and Federal Housing Administration (“FHA”), Veterans Affairs (“VA”), and United States Department of Agriculture (“USDA”) loans.
PrimeLending offers a variety of loan products catering to the specific needs of borrowers seeking purchase or refinancing options, including 30-year and 15-year fixed rate conventional mortgages, adjustable rate mortgages, jumbo loans, new construction loans, and Federal Housing Administration (“FHA”), Veterans Affairs (“VA”), and United States Department of Agriculture loans.
The structured finance line of business provides advisory services and product expertise related to derivatives for U.S. Agency to-be-announced (“TBA”) and commodities. The business line participates in programs in which it issues forward purchase commitments of mortgage-backed securities to certain non-profit housing clients and sells TBA mortgage-backed securities.
The structured finance line of business provides advisory services and product expertise related to derivatives for U.S. Agency to-be-announced (“TBA”) and commodities. The business line participates in programs in which it issues forward purchase commitments of mortgage-backed products to certain non-profit housing clients and sells TBA mortgage-backed securities.
The final rule permits a creditor to extend a higher-priced (subprime) mortgage loan (“HPML”) only if the following conditions are met (subject to exceptions): (i) the creditor obtains a written appraisal; (ii) the appraisal is performed by a certified or licensed appraiser; and (iii) the appraiser conducts a physical property visit of the interior of the property.
The final rule permits a creditor to extend a higher-priced (subprime) mortgage loan only if the following conditions are met (subject to exceptions): (i) the creditor obtains a written appraisal; (ii) the appraisal is performed by a certified or licensed appraiser; and (iii) the appraiser conducts a physical property visit of the interior of the property.
The AML 2020 Act clarifies and streamlines the Currency and Foreign Transactions Reporting Act of 1970, as amended, (the “Bank Secrecy Act”) and AML obligations in the following ways: requires U.S. entities and entities doing business in the United States to report into a national registry maintained by the Financial Crimes Enforcement Network (“FinCEN”) certain beneficial ownership information, subject to exceptions; modernizes the statutory definition of “financial institution” to include (i) entities that provide services involving “value that substitutes for currency,” which includes stored value and virtual currencies and (ii) any person engaged in the trade of antiquities, including an advisor, consultant or any other person who deals in the sale of antiquities; enhances penalties for Bank Secrecy Act and AML violations, including claw back of bonuses; increases AML whistleblower awards and expands whistleblower protections; requires the Secretary of the Treasury to establish and update every four years National AML Priorities, which are incorporated into the Bank Secrecy Act compliance programs at financial institutions subject to the Bank Secrecy Act; among other amendments.
The AML 2020 Act clarifies and streamlines the Currency and Foreign Transactions Reporting Act of 1970, as amended, (the “Bank Secrecy Act”) and AML obligations in the following ways: requires U.S. entities and entities doing business in the United States to report into a national registry maintained by the Financial Crimes Enforcement Network (“FinCEN”) certain beneficial ownership information, subject to exceptions; modernizes the statutory definition of “financial institution” to include (i) entities that provide services involving “value that substitutes for currency,” which includes stored value and virtual currencies and (ii) any person engaged in the trade of antiquities, including an advisor, consultant or any other person who deals in the sale of antiquities; enhances penalties for Bank Secrecy Act and AML violations, including clawback of bonuses; increases AML whistleblower awards and expands whistleblower protections; requires the Secretary of the Treasury to establish and update every four years National AML Priorities, which are incorporated into the Bank Secrecy Act compliance programs at financial institutions subject to the Bank Secrecy Act; among other amendments.
For more information, see our current Environmental, Social and Governance, or ESG, and Sustainability Report, available on our website at https://hilltop-holdings.com/ under the tab “Who We Are – ESG & Sustainability.” The references to our website in this Annual Report are inactive textual references only.
For more information, see our current Environmental, Social and Governance, or ESG, and Sustainability Report, available on our website at https://hilltop.com/ under the tab “Who We Are – ESG & Sustainability.” The references to our website in this Annual Report are inactive textual references only.
PlainsCapital was classified as “well capitalized” at December 31, 2023. ​ Pursuant to FDICIA, an “undercapitalized” bank is prohibited from increasing its assets, engaging in a new line of business, acquiring any interest in any company or insured depository institution, or opening or acquiring a new branch office, except under certain circumstances, including the acceptance by the federal banking regulators of a capital restoration plan for the Bank. ​ FDIC Insurance Assessments .
PlainsCapital was classified as “well capitalized” at December 31, 2024. ​ Pursuant to FDICIA, an “undercapitalized” bank is prohibited from increasing its assets, engaging in a new line of business, acquiring any interest in any company or insured depository institution, or opening or acquiring a new branch office, except under certain circumstances, including the acceptance by the federal banking regulators of a capital restoration plan for the Bank. ​ FDIC Insurance Assessments .
In addition, through our investment management team, the retail group provides a number of advisory programs that offer advisors a wide array of products and services for their advisory businesses.
In addition, through our investment management team, the retail group provides a number of advisory programs that offer advisors a wide array of products and services for their advisory businesses and clients.
Prior to enactment of the Dodd-Frank Act, regulatory approval was not required for a financial holding company to acquire a company, other than a bank or savings association, engaged in activities that were financial in nature or incidental to activities that were financial in nature, as determined by the Federal Reserve Board. ​ Under the Gramm-Leach-Bliley Act, a bank holding company may become a financial holding company by filing a declaration with the Federal Reserve Board if each of its subsidiary banks is “well capitalized” under the Federal Deposit Insurance Corporation Improvement Act prompt corrective action provisions, is “well managed,” and has at least a “satisfactory” rating under the Community Reinvestment Act of 1977 (the “CRA”).
Prior to enactment of the Dodd-Frank Act, regulatory approval was not required for a financial holding company to acquire a company, other than a bank or savings association, engaged in activities that were financial in nature or incidental to activities that were financial in nature, as determined by the Federal Reserve Board. ​ 14 Table of Contents Under the Gramm-Leach-Bliley Act, a bank holding company may become a financial holding company by filing a declaration with the Federal Reserve Board if each of its subsidiary banks is “well capitalized” under the Federal Deposit Insurance Corporation Improvement Act prompt corrective action provisions, is “well managed,” and has at least a “satisfactory” rating under the Community Reinvestment Act of 1977 (the “CRA”).
In March 2020, in connection with the economic uncertainties associated with the effects of the pandemic, the agencies’ issued an additional transition option that permitted banking institutions to mitigate the estimated cumulative regulatory capital effects from CECL over a five-year transitionary period through December 31, 2024. We elected to exercise this option for phase-in. ​ Volcker Rule .
In March 2020, in connection with the economic uncertainties associated with the effects of the pandemic, the agencies’ issued an additional transition option that permitted banking institutions to mitigate the estimated cumulative regulatory capital effects from CECL over a five-year transitionary period through December 31, 2024. We elected to exercise this option for phase-in.
Securitizations backed by “qualified residential mortgages” or “servicing assets” are exempt from the rule, and the definition of “qualified residential mortgages” is subject to review of the joint regulators every five years. ​ Any additional regulatory requirements affecting our mortgage origination operations will result in increased compliance costs and may impact revenue. ​ ​ ​ 26 Table of Contents
Securitizations backed by “qualified residential mortgages” or “servicing assets” are exempt from the rule, and the definition of “qualified residential mortgages” is subject to review of the joint regulators every five years. ​ Any additional regulatory requirements affecting our mortgage origination operations will result in increased compliance costs and may impact revenue. ​ ​ 27 Table of Contents
We seek to distinguish ourselves from our competitors through our commitment to personalized customer service and responsiveness to customer needs while providing a range of competitive mortgage loan products and services. ​ Overall, competition among providers of financial products and services continues to increase as technological advances have lowered the barriers to entry for financial technology companies, with consumers having the opportunity to select from a growing variety of traditional and nontraditional alternatives, including online checking, savings and brokerage accounts, online lending, online insurance underwriters, crowdfunding, digital wallets, and money transfer services.
We seek to distinguish ourselves from our competitors through our commitment to personalized customer service and responsiveness to customer needs while providing a range of competitive mortgage loan products and services. ​ Overall, competition among providers of financial products and services continues to increase as technological advances, including artificial intelligence and automation, have lowered the barriers to entry for financial technology companies, with consumers having the opportunity to select from a growing variety of traditional and nontraditional alternatives, including online checking, savings and brokerage accounts, online lending, online insurance underwriters, crowdfunding, digital wallets, and money transfer services.
Implementing regulations concerning certain provisions of the AML 2020 Act have been proposed by FinCEN, but not all have been finalized. On September 29, 2022, FinCEN issued a final rule establishing a beneficial ownership information reporting requirement under the Corporate Transparency Act (CTA), which was passed as part of the AML 2020 Act.
Implementing regulations concerning certain provisions of the AML 2020 Act have been proposed by FinCEN, but not all have been finalized. On September 29, 2022, FinCEN issued a final rule establishing a beneficial ownership information reporting requirement under the Corporate Transparency Act (“CTA”), which was passed as part of the AML 2020 Act.
The primary sources of our deposits are residents of and businesses located in Texas. At December 31, 2023, the Bank employed approximately 1,000 people. ​ The table below sets forth a distribution of the banking segment’s loans, classified by portfolio segment.
The primary sources of our deposits are residents of and businesses located in Texas. At December 31, 2024, the Bank employed approximately 1,000 people. ​ The table below sets forth a distribution of the banking segment’s loans, classified by portfolio segment.
With respect to interstate acquisitions, the Dodd-Frank Act amends the Bank Holding Company Act by raising the standard by which interstate bank acquisitions are permitted from a standard that the acquiring bank holding company be “adequately capitalized” and “adequately managed” to the higher standard of being “well capitalized” and “well managed”. ​ Control Acquisitions .
With respect to interstate acquisitions, the Dodd-Frank Act amends the Bank Holding Company Act by raising the standard by which interstate bank acquisitions are permitted from a standard that the acquiring bank holding company be “adequately capitalized” and “adequately managed” to the higher standard of being “well capitalized” and “well managed.” ​ Control Acquisitions .
At December 31, 2023, the Hilltop Broker-Dealers were in compliance with applicable net capital requirements. ​ The SEC, CFTC, FINRA and other regulatory organizations impose rules that require notification when net capital falls below certain predefined thresholds.
At December 31, 2024, the Hilltop Broker-Dealers were in compliance with applicable net capital requirements. ​ The SEC, CFTC, FINRA and other regulatory organizations impose rules that require notification when net capital falls below certain predefined thresholds.
Additionally, the Bank Holding Company Act may prohibit Hilltop from engaging in activities other than those of banking, managing or controlling banks or furnishing services to, or performing services for, its subsidiaries, except that it may engage in, directly or indirectly, certain activities that the Federal Reserve Board has determined to be closely related to banking or managing and controlling banks as to be a proper incident thereto.
Additionally, the Bank Holding Company Act prohibits a bank or bank holding company from engaging in activities other than those of banking, managing or controlling banks or furnishing services to, or performing services for, its subsidiaries, except that it may engage in, directly or indirectly, certain activities that the Federal Reserve Board has determined to be closely related to banking or managing and controlling banks as to be a proper incident thereto.
Accruals for DIF assessments were $7.0 million during 2023. ​ As a result of the bank failures during early 2023 and in an effort to strengthen public confidence in the banking system and protect depositors, regulators announced that any losses to the DIF to support uninsured depositors will be recovered by a special assessment on banking organizations, as required by law.
Accruals for DIF assessments were $7.1 million during 2024. ​ As a result of the bank failures during early 2023 and in an effort to strengthen public confidence in the banking system and protect depositors, regulators announced that any losses to the DIF to support uninsured depositors will be recovered by a special assessment on banking organizations, as required by law.
Securities Holdings is a holding company that provides, through its subsidiaries, investment banking and other related financial services, including municipal advisory, sales, trading and underwriting of taxable and tax-exempt fixed income securities, clearing, securities lending, structured finance and retail brokerage services throughout the United States. ​ At December 31, 2023, on a consolidated basis, we had total assets of $16.5 billion, total deposits of $11.1 billion, total loans, including loans held for sale, of $8.9 billion and stockholders’ equity of $2.2 billion. ​ Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “HTH.” ​ Our principal office is located at 6565 Hillcrest Avenue, Dallas, Texas 75205, and our telephone number at that location is (214) 855-2177.
Securities Holdings is a holding company that provides, through its subsidiaries, investment banking and other related financial services, including municipal advisory, sales, trading and underwriting of taxable and tax-exempt fixed income securities, clearing, securities lending, structured finance and retail brokerage services throughout the United States. ​ At December 31, 2024, on a consolidated basis, we had total assets of $16.3 billion, total deposits of $11.1 billion, total loans, including loans held for sale, of $8.7 billion and stockholders’ equity of $2.2 billion. ​ Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “HTH.” ​ Our principal office is located at 6565 Hillcrest Avenue, Dallas, Texas 75205, and our telephone number at that location is (214) 855-2177.
The buffer is measured relative to risk-weighted assets. ​ The rules also prohibit a banking organization from making distributions or discretionary bonus payments during any quarter if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 16 Table of Contents 2.5% at the beginning of the quarter.
The buffer is measured relative to risk-weighted assets. ​ The rules also prohibit a banking organization from making distributions or discretionary bonus payments during any quarter if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5% at the beginning of the quarter.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) establishes a system of prompt corrective action to resolve the problems of undercapitalized financial institutions. Under this system, the federal banking regulators have established five capital categories (“well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized”) in which all 19 Table of Contents institutions are placed.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) establishes a system of prompt corrective action to resolve the problems of undercapitalized financial institutions. Under this system, the federal banking regulators have established five capital categories (“well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized”) in which all institutions are placed.
The final rule also establishes a presumption of compliance with the ability to repay determination for a certain category of mortgages called “qualified mortgages” meeting a series of detailed requirements. The final rule also provides a rebuttable presumption for higher-priced mortgage loans.
The rule also established a presumption of compliance with the ability to repay determination for a certain category of mortgages called “qualified mortgages” meeting a series of detailed requirements. The final rule also provides a rebuttable presumption for higher-priced mortgage loans.
On June 21, 2010, the Federal Reserve Board, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the FDIC jointly issued comprehensive final guidance on incentive compensation policies (the “Incentive Compensation Guidance”) intended to ensure that the incentive compensation 22 Table of Contents policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.
On June 21, 2010, the Federal Reserve Board, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the FDIC jointly issued comprehensive final guidance on incentive compensation policies (the “Incentive Compensation Guidance”) intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.
The Dodd-Frank Act, Gramm-Leach-Bliley Act, the Bank Holding Company Act and other federal laws subject financial and bank holding companies to particular restrictions on the types of activities in which they may engage and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations. ​ Changes of Control.
The Dodd-Frank Act, Gramm-Leach-Bliley Act, the Bank Holding Company Act and other federal laws subject financial and bank holding companies to particular restrictions on the types of activities in which they may 13 Table of Contents engage and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations. ​ Changes of Control.
Broker-dealers are also subject to the privacy and anti-money laundering laws and regulations discussed herein. Additional legislation, changes in rules promulgated by the SEC, securities exchanges, self-regulatory organizations or states or changes in the interpretation or enforcement of existing laws and rules often directly affect the method of operation and profitability of broker-dealers.
Broker-dealers are also subject to the privacy and anti-money laundering laws and regulations discussed herein. Additional legislation, changes in rules promulgated by the SEC, securities exchanges, self-regulatory 23 Table of Contents organizations or states or changes in the interpretation or enforcement of existing laws and rules often directly affect the method of operation and profitability of broker-dealers.
Federal Reserve Board guidelines also provide that banking organizations experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets. ​ 15 Table of Contents Final rules published by the Federal Reserve Board, the FDIC, and the OCC implemented the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act.
Federal Reserve Board guidelines also provide that banking organizations experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets. ​ Final rules published by the Federal Reserve Board, the FDIC, and the OCC implemented the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act.
The regulatory agencies carefully considered the potential impacts on all banking organizations, including community and regional banking organizations such as Hilltop and PlainsCapital, and sought to minimize the potential burden of these changes where consistent with applicable law and the agencies’ goals of establishing a robust and comprehensive capital framework.
The regulatory agencies carefully considered the potential impacts on all banking organizations, including community and regional banking organizations such as Hilltop and PlainsCapital, and sought to minimize the potential burden of these changes where consistent with applicable law and the agencies’ goals of establishing a robust and comprehensive capital 15 Table of Contents framework.
Provisions of the Volcker Rule and the final rules implementing the Volcker Rule also restrict certain activities provided by the Hilltop Broker-Dealers, including proprietary trading and sponsoring or investing in “covered funds.” ​ 24 Table of Contents Regulation Best Interest (“Regulation BI”) and Form CRS Relationship Summary (“Form CRS”).
Provisions of the Volcker Rule and the final rules implementing the Volcker Rule also restrict certain activities provided by the Hilltop Broker-Dealers, including proprietary trading and sponsoring or investing in “covered funds.” ​ Regulation Best Interest (“Regulation BI”) and Form CRS Relationship Summary (“Form CRS”).
Hilltop Securities and Momentum Independent Network are both registered with the Commodity Futures Trading Commission (“CFTC”) as non-guaranteed introducing brokers and as members of the National Futures Association (“NFA”). Additionally, Hilltop Securities Asset Management, LLC, Hilltop Securities and Momentum Independent Network are investment advisers registered with the SEC under the Investment Advisers Act of 1940.
Hilltop Securities and Momentum Independent Network are both registered with the Commodity Futures Trading Commission (“CFTC”) as non-guaranteed introducing brokers and as members of the National Futures Association (“NFA”). Additionally, Hilltop Securities Asset Management, LLC, Hilltop Securities and Momentum Independent Network are investment advisers registered with the SEC under the Investment Advisers Act of 1940, as amended, (the “Advisers Act”).
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available on our website, free of charge, at http://ir.hilltop-holdings.com/ under the tab “Investor Relations - Filings” as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the Securities and Exchange Commission (the “SEC”).
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available on our website, free of charge, at http://ir.hilltop.com/ under the tab “Filings” as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the Securities and Exchange Commission (the “SEC”).
Such requirements and restrictions include requirements to maintain reserves against deposits, restrictions on the nature and amount of loans that may be made and the interest that may be charged thereon and restrictions relating to investments and other activities of the Bank. ​ 18 Table of Contents Restrictions on Transactions with Affiliates .
Such requirements and restrictions include requirements to maintain reserves against deposits, restrictions on the nature and amount of loans that may be made and the interest that may be charged thereon and restrictions relating to investments and other activities of the Bank. ​ Restrictions on Transactions with Affiliates .
On May 5, 2022, the Federal banking agencies released a notice of proposed rulemaking to “strengthen and modernize” the CRA regulations by updating how CRA activities qualify for consideration, where CRA activities are considered, and how CRA activities are evaluated.
On May 5, 2022, the Federal banking agencies released a notice of proposed rulemaking to “strengthen and modernize” the CRA regulations by updating how CRA activities 20 Table of Contents qualify for consideration, where CRA activities are considered, and how CRA activities are evaluated.
This final rule strengthens consumer protections for high-cost mortgages (generally bans balloon payments and prepayment penalties, subject to exceptions and bans or limits certain fees and practices) and requires consumers to receive information about homeownership counseling prior to taking out a high-cost mortgage. ​ Appraisals for High-Risk Mortgages (Regulation Z) .
This final rule strengthens consumer protections for high-cost mortgages (generally bans balloon payments and prepayment 26 Table of Contents penalties, subject to exceptions and bans or limits certain fees and practices) and requires consumers to receive information about homeownership counseling prior to taking out a high-cost mortgage. ​ Appraisals for High-Risk Mortgages (Regulation Z) .
Competition for deposits and in providing lending products and services to consumers and businesses in our market area is intense and pricing is important. Competition for deposits and lending services is also increasing from internet-based competitors and fintech companies. Other factors encountered in competing for deposits are convenient office locations, interest rates and fee structures of products offered.
Competition for deposits and in providing lending products and services to consumers and businesses in our market area continues to be competitive and pricing is important. Competition for deposits and lending services is also increasing from internet-based competitors and fintech companies. Other factors encountered in competing for deposits are convenient office locations, interest rates and fee structures of products offered.
See also Note 27 in the notes to our consolidated financial statements included under Item 8, “Financial Statements and Supplementary Data.” ​ Banking ​ The banking segment includes the operations of the Bank, which, at December 31, 2023, had $13.3 billion in assets and total deposits of $11.1 billion.
See also Note 27 in the notes to our consolidated financial statements included under Item 8, “Financial Statements and Supplementary Data.” ​ Banking ​ The banking segment includes the operations of the Bank, which, at December 31, 2024, had $13.4 billion in assets and total deposits of $11.3 billion.
At December 31, 2023, we provided services to 105 financial organizations, including correspondent firms, correspondent broker-dealers, registered investment advisers, discount and full-service brokerage firms, and institutional firms. ​ Securities Lending. The securities lending group performs activities that include borrowing and lending securities for other broker-dealers, lending institutions, and internal clearing and retail operations.
At December 31, 2024, we provided services to 99 financial organizations, including correspondent firms, correspondent broker-dealers, registered investment advisers, discount and full-service brokerage firms, and institutional firms. ​ Securities Lending. The securities lending group performs activities that include borrowing and lending securities for other broker-dealers, lending institutions, and internal clearing and retail operations.
Beginning June 2020, the “best interest” standard requires a broker-dealer to make recommendations of securities transactions, or investment strategies involving securities, to a retail customer without putting its financial interests ahead of the interests of a retail customer.
Beginning June 2020, the “best interest” standard requires a broker-dealer to make recommendations of securities transactions, or investment 25 Table of Contents strategies involving securities, to a retail customer without putting its financial interests ahead of the interests of a retail customer.
The Bank has a presence in the large metropolitan markets in Texas and conducts substantially all of its banking operations in Texas. ​ Our broker-dealer services are provided through Hilltop Securities and Momentum Independent Network, which conduct business nationwide, with 84% of the broker-dealer segment’s net revenues during 2023 generated through locations in Texas, New York and California. ​ PrimeLending provides residential mortgage origination products and services from over 210 locations in 45 states.
The Bank has a presence in the large metropolitan markets in Texas and conducts substantially all of its banking operations in Texas. ​ Our broker-dealer services are provided through Hilltop Securities and Momentum Independent Network, which conduct business nationwide, with 84% of the broker-dealer segment’s net revenues during 2024 generated through locations in Texas, New York and California. ​ PrimeLending provides residential mortgage origination products and services from over 182 locations in 46 states.
The Gramm-Leach-Bliley Act defines “financial in nature” to include: securities underwriting; dealing and market making; sponsoring mutual funds and investment 14 Table of Contents companies; insurance underwriting and agency; merchant banking activities; and activities that the Federal Reserve Board has determined to be closely related to banking.
The Gramm-Leach-Bliley Act defines “financial in nature” to include: securities underwriting; dealing and market making; sponsoring mutual funds and investment companies; insurance underwriting and agency; merchant banking activities; and activities that the Federal Reserve Board has determined to be closely related to banking.
Transactions between the Bank and its banking and nonbanking affiliates, including Hilltop, PrimeLending, and PCC, are subject to Sections 23A and 23B of the Federal Reserve Act, as implemented by the Federal Reserve Board’s Regulations W. ​ In general, Section 23A imposes limits on the amount of such transactions, and also requires certain levels of collateral for loans to affiliated parties.
Transactions between the Bank and its banking and nonbanking affiliates, including Hilltop, PrimeLending, and PCC, are subject to Sections 23A and 23B of the Federal Reserve Act, as implemented by the Federal Reserve Board’s Regulation W. ​ 18 Table of Contents In general, Section 23A imposes limits on the amount of such transactions, and also requires certain levels of collateral for loans to affiliated parties.
These rules also dictate the ratio of debt-to-equity in the regulatory capital 23 Table of Contents composition of a broker-dealer, and constrain the ability of a broker-dealer to expand its business under certain circumstances.
These rules also dictate the ratio of debt-to-equity in the regulatory capital composition of a broker-dealer, and constrain the ability of a broker-dealer to expand its business under certain circumstances.
The Bank has established a customer identification program pursuant to Section 326 of the USA PATRIOT Act and the Bank Secrecy Act, including obtaining beneficial ownership information on new legal entity customers and otherwise has implemented policies and procedures intended to comply with the foregoing rules until such time as FinCEN adopts final regulations implementing the Corporate Transparency Act, which is part of the AML 2020 Act.
The Bank has established a customer identification program pursuant to Section 326 of the USA PATRIOT Act and the Bank Secrecy Act, including obtaining beneficial ownership information on new legal entity customers and otherwise has implemented policies and procedures intended to comply 22 Table of Contents with the foregoing rules until such time as FinCEN adopts final regulations implementing the CTA, which is part of the AML 2020 Act.
Failure to adequately 20 Table of Contents meet these criteria could impose additional requirements and limitations on the Bank. Additionally, the Bank must publicly disclose the terms of various CRA-related agreements.
Failure to adequately meet these criteria could impose additional requirements and limitations on the Bank. Additionally, the Bank must publicly disclose the terms of various CRA-related agreements.
During 2023, 33% of our employees fell within the minority classification and approximately 45% of our employees were below the age of 45. ​ Hilltop has three employee-based councils, namely the Culture Council, Diversity Momentum Council and Women Momentum Council, each devoted to driving employee engagement and sponsoring events across the enterprise to promote social networking amongst all employees.
During 2024, 34% of our employees fell within the minority classification and approximately 39% of our employees were below the age of 45. ​ Hilltop has three employee-based councils, namely the Culture Council, Diversity Momentum Council and Women Momentum Council, each devoted to driving employee engagement and sponsoring events across the enterprise to promote social networking amongst all employees.
Because non-banking financial institutions are not subject to many of the same regulatory restrictions as banks and bank holding companies, they can often operate with greater flexibility and lower cost structures. ​ Government Supervision and Regulation ​ General ​ We are subject to extensive regulation under federal and state laws.
Because non-banking financial institutions are not subject to many of the same regulatory restrictions as banks and bank holding companies, they can often operate with greater flexibility and lower cost structures. ​ Government Supervision and Regulation ​ General ​ We are subject to extensive regulation under federal and state laws and by various governmental and other regulatory authorities.
Hilltop Securities Asset Management, LLC, Hilltop Securities and Momentum Independent Network are registered with, and subject to oversight and inspection by, the SEC as investment advisers under the Investment Advisers Act of 1940, as amended.
Hilltop Securities Asset Management, LLC, Hilltop Securities and Momentum Independent Network are registered with, and subject to oversight and inspection by, the SEC as investment advisers under the Advisers Act.
When the rules were fully phased-in in 2019, the minimum capital requirements plus the capital conservation buffer should have exceeded the prompt corrective action well-capitalized thresholds. ​ During 2023, our eligible retained income was positive and our capital conservation buffer was greater than 2.5%, and therefore, we were not subject to limits on capital distributions or discretionary bonus payments.
When the rules were fully phased-in in 2019, the minimum capital 16 Table of Contents requirements plus the capital conservation buffer should have exceeded the prompt corrective action well-capitalized thresholds. ​ During 2024, our eligible retained income was positive and our capital conservation buffer was greater than 2.5%, and therefore, we were not subject to limits on capital distributions or discretionary bonus payments.
Loan volumes to be originated on behalf of and retained by the banking segment are evaluated each quarter. Loans sold to and retained by the Bank during 2023, 2022 and 2021 were $140 million, $532 million, and $778 million, respectively.
Loan volumes to be originated on behalf of and retained by the banking segment are evaluated each quarter. Loans sold to and retained by the Bank during 2024, 2023 and 2022 were $124 million, $140 million and $532 million, respectively.
The SEC may conduct administrative and enforcement proceedings that can result in censure, fine, suspension, revocation of registration or expulsion of the investment advisory business of our subsidiaries, our officers or employees. ​ Volcker Rule .
The SEC may conduct administrative and enforcement proceedings that can result in censure, fine, profit disgorgement, monetary penalties, suspension, revocation of registration or expulsion of the investment advisory business of our subsidiaries, our officers or employees. ​ Volcker Rule .
In addition, the mortgage origination segment originates loans on behalf of the Bank. PrimeLending’s determination of whether to retain or release servicing on mortgage loans it sells is impacted by, among other things, changes in mortgage interest rates, and refinancing and market activity.
In addition, the mortgage origination segment originates loans on behalf of the Bank. PrimeLending’s determination of whether to retain or release servicing on mortgage loans it sells is impacted by, among other things, changes in mortgage interest rates, refinancing and market activity, and balance sheet positioning at Hilltop.
Other than these ten states, none of the states in which PrimeLending operated during 2023 represented more than 3% of PrimeLending’s origination volume. ​ Employees and Human Capital Resources At December 31, 2023 we employed approximately 3,800 full-time employees and less than 20 part-time employees. Our employees are not represented by any collective bargaining group.
Other than these ten states, none of the states in which PrimeLending operated during 2024 represented more than 3% of PrimeLending’s origination volume. ​ Employees and Human Capital Resources At December 31, 2024 we employed approximately 3,616 full-time employees and less than 30 part-time employees. Our employees are not represented by any collective bargaining group.
At December 31, 2023, the Hilltop Broker-Dealers employed approximately 770 people and maintained 40 locations in 16 states. ​ Our broker-dealer segment has four primary lines of business: (i) public finance services, (ii) structured finance, (iii) fixed income services, and (iv) wealth management, which includes retail, clearing services and securities lending. 8 Table of Contents These lines of business and the respective services provided reflect the current manner in which the broker-dealer segment’s operations are managed. ​ Public Finance Services .
At December 31, 2024, the Hilltop Broker-Dealers employed approximately 790 people and maintained 39 locations in 15 states. ​ Our broker-dealer segment has four primary lines of business: (i) public finance services, (ii) structured finance, (iii) fixed income services, and (iv) wealth management, which includes retail, clearing services and securities lending. 8 Table of Contents These lines of business and the respective services provided reflect the current manner in which the broker-dealer segment’s operations are managed. ​ Public Finance Services .
The Dodd-Frank Act requires the regulatory agencies to issue regulations requiring that all bank and savings and loan holding companies serve as a source of financial and managerial strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress; however, no such proposed regulations have yet been published. ​ Under Federal Reserve Board policy, a bank holding company is expected to act as a source of financial strength to each of its banking subsidiaries and commit resources to their support.
The Dodd-Frank Act requires the regulatory agencies to issue regulations requiring that all bank and savings and loan holding companies serve as a source of financial and managerial strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress. ​ Under Federal Reserve Board policy, a bank holding company is expected to act as a source of financial strength to each of its banking subsidiaries and commit resources to their support.
Hilltop’s actual capital amounts and ratios in accordance with Basel III exceeded the regulatory capital requirements including conservation buffer in effect at the end of the period. ​ At December 31, 2023, PlainsCapital had a total capital to risk-weighted assets ratio of 16.58%, Tier 1 capital to risk-weighted assets ratio of 15.44% and a common equity Tier 1 capital to risk-weighted assets ratio of 15.44%.
Hilltop’s actual capital amounts and ratios in accordance with Basel III exceeded the regulatory capital requirements including conservation buffer in effect at the end of the period. ​ At December 31, 2024, PlainsCapital had a total capital to risk-weighted assets ratio of 16.54%, Tier 1 capital to risk-weighted assets ratio of 15.35% and a common equity Tier 1 capital to risk-weighted assets ratio of 15.35%.
The commissions received from these third-party carriers are paid directly to the advisor. At December 31, 2023, we employed 92 registered representatives in 16 retail brokerage offices and had contracts with 186 independent retail representatives for the administration of their securities business. ​ Clearing Services .
The commissions received from these third-party carriers are paid directly to the advisor. At December 31, 2024, we employed 92 registered representatives in 19 retail brokerage offices and had contracts with 166 independent retail representatives for the administration of their securities business. ​ Clearing Services .
As a general matter, an investor is deemed to control a depository institution or other company if the investor owns or controls 25% or more of any class of voting stock, and in certain other circumstances, an investor may be presumed to control a depository institution or other company if the investor owns or controls less than 25% or more of any class of voting stock.
As a general matter, an investor is deemed to control a depository institution or other company if the investor owns or controls 25% or more of any class of voting stock or 33% or more of any class of stock (voting or non-voting), and in certain other circumstances, an investor may be presumed to control a depository institution or other company if the investor owns or controls less than 25% of any class of voting stock where certain other triggering factors exist.
Our underwriting practices include: ​ ● granting loans on a sound and collectible basis; ● obtaining a balance between maximum yield and minimum risk; ● ensuring that primary and secondary sources of repayment are adequate in relation to the amount of the loan; and ● ensuring that each loan is properly documented and, if appropriate, adequately insured. ​ PrimeLending also acts as a primary servicer for loans originated prior to sale and loans sold with servicing retained. ​ PrimeLending had a staff of approximately 1,560 people, including approximately 930 mortgage loan officers, as of December 31, 2023 that produced $8.2 billion in closed mortgage loan volume during 2023, 93.4% of which related to home purchases volume.
Our underwriting practices include: ​ ● granting loans on a sound and collectible basis; ● obtaining a balance between maximum yield and minimum risk; ● ensuring that primary and secondary sources of repayment are adequate in relation to the amount of the loan; and ● ensuring that each loan is properly documented and, if appropriate, adequately insured. ​ PrimeLending also acts as a primary servicer for loans originated prior to sale and loans sold with servicing retained. ​ PrimeLending, including its ABAs, had a staff of approximately 1,409 people, including approximately 813 mortgage loan officers, as of December 31, 2024 that produced $8.6 billion in closed mortgage loan volume during 2024, 90.1% of which related to home purchases volume.
FDICIA made a number of reforms addressing the safety and soundness of the deposit insurance system, supervision of domestic and foreign depository institutions, and improvement of accounting standards. 21 Table of Contents This statute also limited deposit insurance coverage, implemented changes in consumer protection laws and provided for least-cost resolution and prompt regulatory action with regard to troubled institutions. ​ FDICIA requires every bank with total assets in excess of $500 million to have an annual independent audit made of the Bank’s financial statements by a certified public accountant to verify that the financial statements of the Bank are presented in accordance with GAAP and comply with such other disclosure requirements as prescribed by the FDIC. ​ Brokered Deposits .
This statute also limited deposit insurance coverage, implemented changes in consumer protection laws and provided for least-cost resolution and prompt regulatory action with regard to troubled institutions. ​ 21 Table of Contents FDICIA requires every bank with total assets in excess of $500 million to have an annual independent audit made of the Bank’s financial statements by a certified public accountant to verify that the financial statements of the Bank are presented in accordance with GAAP and comply with such other disclosure requirements as prescribed by the FDIC. ​ Brokered Deposits .
Generally, subject to a narrow exception, the banking regulator must appoint a receiver or conservator for an institution that is critically undercapitalized.
Generally, subject to a narrow 19 Table of Contents exception, the banking regulator must appoint a receiver or conservator for an institution that is critically undercapitalized.
At December 31, 2023, approximately 36% of our current staff had been with us for ten years or more. ​ During 2023, women represented over 55% of Hilltop’s workforce, and 11% of the overall executive management team.
At December 31, 2024, approximately 36% of our current staff had been with us for ten years or more. ​ During 2024, women represented over 54% of Hilltop’s workforce, and 12% of the overall executive management team.
On December 29, 2020, the CFPB published a final rule creating a new category of “qualified mortgage,” called a seasoned qualified mortgage, for first lien, fixed rate covered loans that meet certain performance requirements, are held in portfolio by the originating creditor or first purchaser for a 36-month period, comply with general restrictions on product features and points and fees, and meet certain underwriting requirements.
On December 29, 2020, the CFPB published a final rule creating a new category of “qualified mortgage,” called a seasoned qualified mortgage, for first lien, fixed rate covered loans that meet certain performance requirements, are held in portfolio by the originating creditor or first purchaser for a 36-month period, comply with general restrictions on product features and points and fees, and meet certain underwriting requirements. ​ High-Cost Mortgage and Homeownership Counseling Amendments to the Truth in Lending Act (Regulation Z) .
The banking segment’s loan portfolio included $1.6 billion in warehouse lines of credit extended to PrimeLending and its affiliated business arrangements (“ABAs”), of which $0.9 billion was drawn at December 31, 2023.
The banking segment’s loan portfolio included $1.3 billion in warehouse lines of credit extended to PrimeLending and its affiliated business arrangements (“ABAs”), of which $0.8 billion was drawn at December 31, 2024.
At December 31, 2023, our mortgage origination segment operated from over 210 locations in 45 states, originating 28.9%, 7.9% and 5.2%, respectively, of its mortgage loans (by dollar volume) from its Texas, California and South Carolina locations. The mortgage lending business is subject to variables that can impact loan origination volume, including seasonal and interest rate fluctuations.
At December 31, 2024, our mortgage origination segment operated from over 182 locations in 46 states, originating 31.5%, 7.7% and 5.3%, respectively, of its mortgage loans (by dollar volume) from its Texas, California and South Carolina locations. The mortgage lending business is subject to variables that can impact loan origination volume, including seasonal and interest rate fluctuations.
PrimeLending primarily originates its mortgage loans through a retail channel, with limited lending through its ABAs. During 2023, funded loan volume through ABAs was approximately 14% of the mortgage origination segment’s total loan volume.
PrimeLending primarily originates its mortgage loans through a retail channel, with additional lending through its ABAs. During 2024, funded loan volume through ABAs was approximately 16% of the mortgage origination segment’s total loan volume.
In addition, Regulation BI prohibits a broker-dealer and its associated persons from using the term “adviser” or “advisor” if the broker-dealer is not an RIA or the associated person is not a supervised person of an RIA. ​ Changing Regulatory Environment . The regulatory environment in which the Hilltop Broker-Dealers operate is subject to frequent change.
In addition, Regulation BI prohibits a broker-dealer and its associated persons from using the term “adviser” or “advisor” if the broker-dealer is not an RIA or the associated person is not a supervised person of an RIA. ​ Changing Regulatory Environment .
Additionally, this business line provides agricultural insurance through Hilltop Securities Insurance Agency Inc., whereby we act as an agent in these transactions and retain no underwriting risk with regard to the sale of insurance products. ​ Fixed Income Services .
The structured finance business line also specializes in the sales and trading of mortgage-backed, asset-backed and commercial mortgage-backed securities. Additionally, this business line provides agricultural insurance through Hilltop Securities Insurance Agency Inc., whereby we act as an agent in these transactions and retain no underwriting risk with regard to the sale of insurance products. ​ Fixed Income Services .
During 2023, an aggregate of 67% of PrimeLending’s origination volume was concentrated in ten states, with 42% concentrated in Texas, California and South Carolina, collectively.
During 2024, an aggregate of 68% of PrimeLending’s origination volume was concentrated in ten states, with 44% concentrated in Texas, California and South Carolina, collectively.
FinCEN issued a final rule, effective on January 1, 2024, imposing certain reporting requirements of beneficial ownership of certain business entities other than those entities not meeting, or excluded from, the definition of a “reporting company.” ​ Incentive Compensation Guidance.
FinCEN issued a final rule, effective on January 1, 2024, imposing certain reporting requirements of beneficial ownership of certain business entities other than those entities not meeting, or excluded from, the definition of a “reporting company.” The compliance date for enforcement of the CTA’s beneficial ownership information reporting requirement has been stayed pending litigation. ​ Incentive Compensation Guidance.
Our futures business is also regulated by the NFA, a registered futures association. Violation of the rules of the CFTC, the NFA or the commodity exchanges could result in remedial actions including fines, registration restrictions or terminations, trading prohibitions or revocations of commodity exchange memberships. ​ Investment Advisory Activity .
Violation of the rules of the CFTC, the NFA or the commodity exchanges could result in remedial actions including fines, registration restrictions or terminations, trading prohibitions or revocations of commodity exchange memberships. ​ Investment Advisory Activity .
We anticipate similar results during 2024. ​ At December 31, 2023, Hilltop had a total capital to risk-weighted assets ratio of 22.34%, Tier 1 capital to risk-weighted assets ratio of 19.32% and a common equity Tier 1 capital to risk-weighted assets ratio of 19.32%.
We anticipate similar results during 2025. ​ At December 31, 2024, Hilltop had a total capital to risk-weighted assets ratio of 24.40%, Tier 1 capital to risk-weighted assets ratio of 21.23% and a common equity Tier 1 capital to risk-weighted assets ratio of 21.23%.
The fixed income services line of business specializes in sales, trading and underwriting of U.S. government and government agency bonds, corporate bonds, municipal bonds, mortgage-backed, asset-backed and commercial mortgage-backed securities and structured products to support sales and other client activities.
The fixed income services line of business specializes in sales, trading and underwriting of U.S. government and government agency bonds, corporate bonds, municipal bonds and structured products to support sales and other client activities. In addition, the fixed income services line of business provides asset and liability management advisory services to community banks. ​ Wealth Management .
At December 31, 2023, Hilltop Securities had total assets of $2.9 billion and net capital of $281 million, which was $274 million in excess of its minimum net capital requirement of $7 million.
At December 31, 2024, Hilltop Securities had total assets of $2.8 billion and net capital of $264.2 million, which was $258.1 million in excess of its minimum net capital requirement of $6.1 million.
Our business, financial condition and operating results may be adversely affected as a result of new or revised legislation or regulations imposed by the U.S. Congress, the SEC, FINRA or other U.S. and state governmental and regulatory authorities.
The regulatory environment in which the Hilltop Broker-Dealers (including Hilltop Securities Asset Management, LLC) operate is subject to frequent change. Our business, financial condition and operating results may be adversely affected as a result of new or revised legislation or regulations imposed by the U.S. Congress, the SEC, FINRA or other U.S. and state governmental and regulatory authorities.
Based on our calculation, we do not expect the Bank to be impacted by this special assessment. ​ The Dodd-Frank Act permanently increased the standard maximum deposit insurance amount to $250,000. The FDIC insurance coverage limit applies per depositor, per insured depository institution for each account ownership category. ​ Community Reinvestment Act.
The Bank was not impacted by this special assessment as the uninsured deposits were less than $5 billion at December 31, 2022. ​ The Dodd-Frank Act permanently increased the standard maximum deposit insurance amount to $250,000. The FDIC insurance coverage limit applies per depositor, per insured depository institution for each account ownership category. ​ Community Reinvestment Act.
The Hilltop Broker-Dealers that hold customers’ funds and securities are subject to the SEC’s customer protection rule (Rule 15c3-3 under the Exchange Act), which generally provides that such broker-dealers maintain physical possession or control of all fully-paid securities and excess margin securities carried for the account of customers and maintain certain reserves of cash or qualified securities. ​ Securities Investor Protection Corporation (“SIPC”) .
As noted above in Net Capital Requirements , the Hilltop Broker-Dealers that hold customers’ funds and securities are subject to the SEC’s customer protection rule (Rule 15c3-3 under the Exchange Act), which generally provides that such broker-dealers maintain physical possession or control of all fully-paid securities and excess margin securities carried for the account of customers and maintain certain reserves of cash or qualified securities. ​ The SEC recently adopted amendments to Rule 15c3-3, which would be become effective as of March 14, 2025, and would have a compliance date of December 31, 2025.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAlso, future additions to our allowance for credit losses will reduce our future earnings. ● Adverse developments affecting the financial services industry, such as bank failures or concerns involving liquidity, may have a material effect on the Company’s operations. ● Our operational systems and networks have been, and will continue to be, subject to an increasing risk of continually evolving cybersecurity or other technological risks, which could result in a loss of customer business, financial liability, regulatory penalties, damage to our reputation or the disclosure of confidential information. ● Our banking segment is subject to risk arising from conditions in the commercial real estate market and may be adversely affected by weaknesses in the commercial real estate market. ● Our business and results of operations may be adversely affected by unpredictable economic, market and business conditions. ● Our business is subject to interest rate risk, and fluctuations in interest rates may adversely affect our earnings, capital levels and overall results. ● Our mortgage origination business is subject to fluctuations based upon seasonal and other factors and, as a result, our results of operations for any given quarter may not be indicative of the results that may be achieved for the full fiscal year. ● The financial services industry is characterized by rapid technological change, and if we fail to keep pace, our business may suffer. ● We are heavily reliant on technology, and a failure to effectively implement new technological solutions or enhancements to existing systems or platforms could adversely affect our business operations and the financial results of our operations. ● Our geographic concentration may magnify the adverse effects and consequences of any regional or local economic downturn. ● An adverse change in real estate market values may result in losses in our banking segment and otherwise adversely affect our profitability. ● The economic impact of the pandemic has adversely affected, and may continue to adversely affect, our business, financial condition, liquidity and results of operations. ● Our risk management processes may not fully identify and mitigate exposure to the various risks that we face, including interest rate, credit, liquidity and market risk. ● Our hedging strategies may not be successful in mitigating our exposure to interest rate risk. ● Our bank lending, margin lending, stock lending, securities trading and execution and mortgage purchase businesses are all subject to credit risk. ● We depend on our computer and communications systems and an interruption in service would negatively affect our business. 27 Table of Contents ● Climate change could adversely affect our business and performance, including indirectly through impacts on our customers. ● We are heavily dependent on dividends from our subsidiaries. ● Our indebtedness may affect our ability to operate our business, and may have a material adverse effect on our financial condition and results of operations.
Biggest changeAlso, future additions to our allowance for credit losses will reduce our future earnings. ● Adverse developments affecting the financial services industry, such as bank failures or concerns involving liquidity, may have a material effect on the Company’s operations. ● Our operational systems and networks have been, and will continue to be, subject to an increasing risk of continually evolving cybersecurity or other technological risks, which could result in a loss of customer business, financial liability, regulatory penalties, damage to our reputation or the disclosure of confidential information. ● Our banking segment is subject to risk arising from conditions in the commercial real estate market and may be adversely affected by weaknesses in the commercial real estate market. ● Our business and results of operations may be adversely affected by unpredictable economic, market and business conditions. ● Our business is subject to interest rate risk, and fluctuations in interest rates may adversely affect our earnings, capital levels and overall results. ● Inflationary pressures and rising prices may affect our results of operations and financial condition. ● Our mortgage origination business is subject to fluctuations based upon seasonal and other factors and, as a result, our results of operations for any given quarter may not be indicative of the results that may be achieved for the full fiscal year. ● The financial services industry is characterized by rapid technological change, and if we fail to keep pace, our business may suffer. ● We are heavily reliant on technology, and a failure to effectively implement new technological solutions or enhancements to existing systems or platforms could adversely affect our business operations and the financial results of our operations. ● Our geographic concentration may magnify the adverse effects and consequences of any regional or local economic downturn. ● An adverse change in real estate market values may result in losses in our banking segment and otherwise adversely affect our profitability. ● Our risk management processes may not fully identify and mitigate exposure to the various risks that we face, including interest rate, credit, liquidity and market risk. ● Our hedging strategies may not be successful in mitigating our exposure to interest rate risk. ● Our bank lending, margin lending, stock lending, securities trading and execution and mortgage purchase businesses are all subject to credit risk. ● We depend on our computer and communications systems and an interruption in service would negatively affect our business. ● Climate change could adversely affect our business and performance, including indirectly through impacts on our customers. 28 Table of Contents ● We are heavily dependent on dividends from our subsidiaries. ● We are subject to extensive supervision and regulation that could restrict our activities and impose financial requirements or limitations on the conduct of our business and limit our ability to generate income. ● We may be subject to more stringent capital requirements in the future. ● Our broker-dealer business is subject to various risks associated with the securities industry. ● Market fluctuations could adversely impact our broker-dealer business. ● Our investment advisory business may be affected if our investment products perform poorly. ● Our existing correspondents may choose to perform their own clearing services or move their clearing business to one of our competitors or exit the business. ● Several of our broker-dealer segment’s product lines rely on favorable tax treatment, and changes in federal tax law could impact the attractiveness of these products to our customers. ● Our mortgage origination segment is subject to investment risk on loans that it originates. ● If we fail to develop, implement and maintain an effective system of internal control over financial reporting, the accuracy and timing of our financial reporting in future periods may be adversely affected. ● We ultimately may write-off goodwill and other intangible assets resulting from business combinations. ● The value of our mortgage servicing rights portfolio fluctuates due to changes in interest rates, which may increase the volatility of our earnings. ● The accuracy of our financial statements and related disclosures could be affected if we are exposed to actual conditions different from the judgments, assumptions or estimates used in our critical accounting estimates. ● We are dependent on our management team, and the loss of our senior executive officers or other key employees could impair our relationship with customers and adversely affect our business and financial results. ● We are subject to losses due to fraudulent and negligent acts. ● Negative publicity regarding us, or financial institutions in general, could damage our reputation and adversely impact our business and results of operations. ● We are subject to legal claims and litigation, including potential securities law liabilities, any of which could have a material adverse effect on our business. ● Our indebtedness may affect our ability to operate our business, and may have a material adverse effect on our financial condition and results of operations.
Given the potential impacts of the operating performance of these reporting segments and overall economic conditions, actual results may differ materially from our current estimates as the scope of such impacts evolves or if the duration of business disruptions is longer than currently anticipated. ​ We further considered the amount by which fair value exceeded book value in the most recent quantitative analysis and sensitivities performed.
Given the potential impacts of the operating performance of our reporting segments and overall economic conditions, actual results may differ materially from our current estimates as the scope of such impacts evolves or if the duration of business disruptions is longer than currently anticipated. ​ We further considered the amount by which fair value exceeded book value in the most recent quantitative analysis and sensitivities performed.
Our continued financial success depends to a degree on factors beyond our control, including: ​ ● national and local economic conditions, such as the level and volatility of short-term and long-term interest rates, inflation, home prices, unemployment and under-employment levels, energy prices, bankruptcies, household income and consumer spending; 31 Table of Contents ● the availability and cost of capital and credit; ● incidence of customer fraud; and ● federal, state and local laws affecting these matters. ​ The deterioration of any of these conditions, as we have experienced with past economic downturns, could adversely affect our consumer and commercial businesses and securities portfolios, our level of loan charge-offs and provision for credit losses, the carrying value of our deferred tax assets, the investment portfolio of our insurance segment, our capital levels and liquidity, our securities underwriting business and our results of operations. ​ Several factors could pose risks to the financial services industry, including tightening monetary policies by central banks, rising energy prices, trade wars, restrictions and tariffs; slowing growth in emerging economies; geopolitical matters, including international political unrest, disturbances and conflicts; acts of war and terrorism; pandemics; changes in interest rates; regulatory uncertainty; continued infrastructure deterioration; low oil prices; disruptions in global or national supply chains; and natural disasters.
Our continued financial success depends to a degree on factors beyond our control, including: ​ ● national and local economic conditions, such as the level and volatility of short-term and long-term interest rates, inflation, home prices, unemployment and under-employment levels, energy prices, bankruptcies, household income and consumer spending; ● the availability and cost of capital and credit; ● incidence of customer fraud; and ● federal, state and local laws affecting these matters. ​ The deterioration of any of these conditions, as we have experienced with past economic downturns, could adversely affect our consumer and commercial businesses and securities portfolios, our level of loan charge-offs and provision for credit losses, the carrying value of our deferred tax assets, the investment portfolio of our insurance segment, our capital levels and liquidity, our securities underwriting business and our results of operations. ​ Several factors could pose risks to the financial services industry, including tightening monetary policies by central banks, rising energy prices, trade wars, restrictions and tariffs; slowing growth in emerging economies; geopolitical matters, including international political unrest, disturbances and conflicts; acts of war and terrorism; pandemics; changes in interest rates; regulatory uncertainty; continued infrastructure deterioration; low oil prices; disruptions in global or national supply chains; and natural disasters.
Our securities trading, market-making and underwriting activities involve the purchase and sale of securities as a principal, which subjects our capital to significant risks. Market conditions could limit our ability to sell securities purchased or to purchase securities sold in such transactions. If interest rates increase, the value of debt securities we hold in our inventory would decrease.
Our securities trading and underwriting activities involve the purchase and sale of securities as a principal, which subjects our capital to significant risks. Market conditions could limit our ability to sell securities purchased or to purchase securities sold in such transactions. If interest rates increase, the value of debt securities we hold in our inventory would decrease.
Our significant amount of indebtedness could have important consequences, such as: ​ ● limiting our ability to obtain additional financing to fund our working capital needs, acquisitions, capital expenditures or other debt service requirements or for other purposes; ● limiting our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to service debt; ● limiting our ability to compete with other companies who are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions; ● restricting us from making strategic acquisitions, developing properties or pursuing business opportunities; ● restricting the way in which we conduct our business because of financial and operating covenants in the agreements governing our and certain of our subsidiaries’ existing and future indebtedness, including, in the case of certain indebtedness of subsidiaries, certain covenants that restrict the ability of such subsidiaries to pay dividends or make other distributions to us; ● exposing us to potential events of default (if not cured or waived) under financial and operating covenants contained in our or our subsidiaries’ debt instruments that could have a material adverse effect on our business, financial condition and operating results; ● increasing our vulnerability to a downturn in general economic conditions or a decrease in pricing of our products; and ● limiting our ability to react to changing market conditions in our industry and in our customers’ industries. ​ In addition to our debt service obligations, our operations require substantial investments on a continuing basis.
Our significant amount of indebtedness could have important consequences, such as: ​ ● limiting our ability to obtain additional financing to fund our working capital needs, acquisitions, capital expenditures or other debt service requirements or for other purposes; ● limiting our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to service debt; ● limiting our ability to compete with other companies who are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions; ● restricting us from making strategic acquisitions, developing properties or pursuing business opportunities; ● restricting the way in which we conduct our business because of financial and operating covenants in the agreements governing our and certain of our subsidiaries’ existing and future indebtedness, including, in the case of certain indebtedness of subsidiaries, certain covenants that restrict the ability of such subsidiaries to pay dividends or make other distributions to us; ● exposing us to potential events of default (if not cured or waived) under financial and operating covenants contained in our or our subsidiaries’ debt instruments that could have a material adverse effect on our business, financial condition and operating results; ● increasing our vulnerability to a downturn in general economic conditions or a decrease in pricing of our products; and ● limiting our ability to react to changing market conditions in our industry and in our customers’ industries. ​ 44 Table of Contents In addition to our debt service obligations, our operations require substantial investments on a continuing basis.
The effects of an increase in market interest rates may result in a decrease in the value of our available for sale investment portfolio. ​ Market interest rates are affected by many factors outside of our control, including inflation, recession, unemployment, money supply, international disorder and instability in domestic and foreign financial markets.
The effects of an increase in market interest rates may result in a decrease in the value of our available for sale investment portfolio. ​ Market interest rates are affected by many factors outside of our control, including inflation, recession, unemployment, money supply, political factors, international disorder and instability in domestic and foreign financial markets.
These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations, including our obligations under the Senior and Subordinated Notes. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time.
These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations, including our obligations under the Subordinated Notes. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time.
Below is a summary of our risk factors with a more detailed discussion following. ​ ● Our allowances for credit losses for loans and debt securities may prove inadequate or we may be negatively affected by credit risk exposures.
Below is a summary of our material risk factors with a more detailed discussion following. ​ ● Our allowances for credit losses for loans and debt securities may prove inadequate, or we may be negatively affected by credit risk exposures.
In addition, even if an interested director abstains from voting, the director’s participation in the meeting and discussion of an issue in which he or she has, or companies with which he or she is associated have, an interest could influence the votes of other directors regarding the issue. ​ 49 Table of Contents Our rights and the rights of our stockholders to take action against our directors and officers are limited. ​ We are organized under Maryland law, which provides that a director or officer has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances.
In addition, even if an interested director abstains from voting, the director’s participation in the meeting and discussion of an issue in which he or she has, or companies with which he or she is associated have, an interest could influence the votes of other directors regarding the issue. ​ Our rights and the rights of our stockholders to take action against our directors and officers are limited. ​ We are organized under Maryland law, which provides that a director or officer has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances.
We have incurred, and may continue to incur, expenses related to this incident, and we remain subject to risks and uncertainties as a result of the incident, including litigation and additional regulatory scrutiny. ​ The continued occurrence of cybersecurity incidents across a range of industries has resulted in increased legislative and regulatory scrutiny over cybersecurity and calls for additional data privacy laws and regulations at both the state and federal levels.
We have incurred, and may continue to incur, expenses related to this incident, and we remain subject to risks and uncertainties as a result of the incident, including litigation and additional regulatory scrutiny. ​ The continued occurrence of cybersecurity incidents and threats thereof across a range of industries has resulted in increased legislative and regulatory scrutiny over cybersecurity and calls for additional data privacy laws and regulations at both the state and federal levels.
If new debt is added to our current debt levels, the risks described above could increase. ​ We may not be able to generate sufficient cash to service all of our indebtedness, including the Senior and Subordinated Notes, and may be forced to take other actions to satisfy our obligations under our indebtedness that may not be successful. ​ Our ability to satisfy our debt obligations will depend upon, among other things: ​ ● our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, many of which are beyond our control; and ● our future ability to refinance the Senior and Subordinated Notes, which depends on, among other things, our compliance with the covenants in the indentures governing the Senior and Subordinated Notes. ​ We cannot assure you that our business will generate sufficient cash flow from operations, or that we will be able to obtain financing in an amount sufficient to fund our liquidity needs. 44 Table of Contents ​ If our cash flows and capital resources are insufficient to service our indebtedness, including the Senior and Subordinated Notes, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness, including the Senior and Subordinated Notes.
If new debt is added to our current debt levels, the risks described above could increase. ​ We may not be able to generate sufficient cash to service all of our indebtedness, including the Subordinated Notes, and may be forced to take other actions to satisfy our obligations under our indebtedness that may not be successful. ​ Our ability to satisfy our debt obligations will depend upon, among other things: ​ ● our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, many of which are beyond our control; and ● our future ability to refinance the Subordinated Notes, which depends on, among other things, our compliance with the covenants in the indentures governing the Subordinated Notes. ​ We cannot assure you that our business will generate sufficient cash flow from operations, or that we will be able to obtain financing in an amount sufficient to fund our liquidity needs. ​ If our cash flows and capital resources are insufficient to service our indebtedness, including the Subordinated Notes, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness, including the Subordinated Notes.
This competition could result in the loss of customer deposits and brokerage accounts and lower mortgage originations which could have a material adverse effect on our financial condition and results of operations. ​ Acquisitions may be delayed, impeded, or prohibited due to regulatory issues. ​ Acquisitions by financial institutions are subject to approval by a variety of federal and state regulatory agencies.
This competition could result in the loss of customer deposits and brokerage accounts and lower mortgage originations which could have a material adverse effect on our financial condition and results of operations. ​ Legal and Regulatory Risks ​ Acquisitions may be delayed, impeded, or prohibited due to regulatory issues. ​ Acquisitions by financial institutions are subject to approval by a variety of federal and state regulatory agencies.
Such purchases may be subject to a nondeductible excise tax under the Inflation Reduction Act of 2022 equal to 1% of the fair market value of the shares repurchased, subject to certain limitations. 50 Table of Contents ​ Any future declarations, amount and timing of any dividends and/or the amount and timing of such stock repurchases are subject to capital availability and the discretion of our board of directors, which must evaluate, among other things, whether cash dividends and/or stock repurchases are in the best interest of our stockholders and are in compliance with all applicable laws and any agreements containing provisions that limit our ability to declare and pay cash dividends and/or repurchase stock.
Such purchases may be subject to a nondeductible excise tax under the Inflation Reduction Act of 2022 equal to 1% of the fair market value of the shares repurchased, subject to certain limitations. ​ Any future declarations, amount and timing of any dividends and/or the amount and timing of such stock repurchases are subject to capital availability and the discretion of our board of directors, which must evaluate, among other things, whether cash dividends and/or stock repurchases are in the best interest of our stockholders and are in compliance with all applicable laws and any agreements containing provisions that limit our ability to declare and pay cash dividends and/or repurchase stock.
If we, or our relationships with certain customers, vendors or suppliers, became the subject of negative publicity, our ability to attract and retain customers and employees, and our financial condition and results of operations, could be adversely impacted. ​ We are subject to legal claims and litigation, including potential securities law liabilities, any of which could have a material adverse effect on our business. ​ We face significant legal risks in each of the business segments in which we operate, and the volume of legal claims and amount of damages and penalties claimed in litigation and regulatory proceedings against financial service companies remains high.
If we, or our relationships 42 Table of Contents with certain customers, vendors or suppliers, became the subject of negative publicity, our ability to attract and retain customers and employees, and our financial condition and results of operations, could be adversely impacted. ​ We are subject to legal claims and litigation, including potential securities law liabilities, any of which could have a material adverse effect on our business. ​ We face significant legal risks in each of the business segments in which we operate, and the volume of legal claims and amount of damages and penalties claimed in litigation and regulatory proceedings against financial service companies remains high.
The preferred stock may be issued, in one or more series, with the preferences and other terms designated by our board of directors that may delay or prevent a change in control of us, even if the change is in the best interests of stockholders. At December 31, 2023, no shares of preferred stock were outstanding. ​ Banking Laws .
The preferred stock may be issued, in one or more series, with the preferences and other terms designated by our board of directors that may delay or prevent a change in control of us, even if the change is in the best interests of stockholders. At December 31, 2024, no shares of preferred stock were outstanding. ​ Banking Laws .
Any significant loss of correspondents due to self-clearing, moving their clearing business to a competitor or exiting the business could have a material adverse effect on our business, financial condition, results of operations or cash flows. ​ 38 Table of Contents Several of our broker-dealer segment’s product lines rely on favorable tax treatment and changes in federal tax law could impact the attractiveness of these products to our customers. ​ We offer a variety of services and products, such as individual retirement accounts and municipal bonds, which rely on favorable federal income tax treatment to be attractive to our customers.
Any significant loss of correspondents due to self-clearing, moving their clearing business to a competitor or exiting the business could have a material adverse effect on our business, financial condition, results of operations or cash flows. ​ Several of our broker-dealer segment’s product lines rely on favorable tax treatment, and changes in federal tax law could impact the attractiveness of these products to our customers. ​ We offer a variety of services and products, such as individual retirement accounts and municipal bonds, which rely on favorable federal income tax treatment to be attractive to our customers.
Any regional or local economic downturn that affects Texas or, to a lesser extent, California, whether caused by recession, inflation, unemployment, changing oil prices, natural disasters, supply chain disruptions or other factors, may affect us and our profitability more significantly and more adversely than our competitors that are less geographically concentrated, and could have a material adverse effect on our results of operations and financial condition. ​ An adverse change in real estate market values may result in losses in our banking segment and otherwise adversely affect our profitability. ​ At December 31, 2023, 59% of the loan portfolio of our banking segment was comprised of loans with commercial or residential real estate as the primary component of collateral.
Any regional or local economic downturn that affects Texas or, to a lesser extent, California, whether caused by recession, inflation, unemployment, changing oil prices, natural disasters, supply chain disruptions or other factors, may affect us and our profitability more significantly and more adversely than our competitors that are less geographically concentrated, and could have a material adverse effect on our results of operations and financial condition. ​ An adverse change in real estate market values may result in losses in our banking segment and otherwise adversely affect our profitability. ​ At December 31, 2024, 64% of the loan portfolio of our banking segment was comprised of loans with commercial or residential real estate as the primary component of collateral.
Furthermore, a prolonged period of inflation could cause wages and other costs to Hilltop and its subsidiaries to increase, which could adversely affect our results of operations and financial condition. ​ 33 Table of Contents Our mortgage origination business is subject to fluctuations based upon seasonal and other factors and, as a result, our results of operations for any given quarter may not be indicative of the results that may be achieved for the full fiscal year. ​ Our mortgage origination business is subject to several variables that can impact loan origination volume, including seasonal and interest rate fluctuations.
Furthermore, a prolonged period of inflation could cause wages and other costs to Hilltop and its subsidiaries to increase, which could adversely affect our results of operations and financial condition. ​ Our mortgage origination business is subject to fluctuations based upon seasonal and other factors and, as a result, our results of operations for any given quarter may not be indicative of the results that may be achieved for the full fiscal year. ​ Our mortgage origination business is subject to several variables that can impact loan origination volume, including seasonal and interest rate fluctuations.
These assets are sensitive to any significant changes in related results of operations of the underlying businesses. ​ In light of the recent and continuing macroeconomic challenges in the mortgage industry given tight housing inventories and mortgage interest rate levels, our mortgage origination segment experienced lower-than-forecasted operating results during 2023.
These assets are sensitive to any significant changes in related results of operations of the underlying businesses. ​ In light of continuing macroeconomic challenges in the mortgage industry given tight housing inventories and mortgage interest rate levels, our mortgage origination segment experienced lower-than-forecasted operating results during 2022 and 2023.
As a result of this uncertainty, we face the potential for reputational risk, deposit outflows, increased costs and competition for liquidity, and increased credit risk which, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operations. ​ Our operational systems and networks have been, and will continue to be, subject to an increasing risk of continually evolving cybersecurity or other technological risks, which could result in a loss of customer business, financial liability, regulatory penalties, damage to our reputation or the disclosure of confidential information. ​ We rely heavily on communications and information systems to conduct our business and maintain the security of confidential information and complex transactions, which subjects us to an increasing risk of cyber incidents from these activities due to a combination of new technologies and the increasing use of the Internet to conduct financial transactions, as well as a potential failure, interruption or breach in the security of these systems, including those that could result from attacks or planned changes, upgrades and maintenance of these systems.
As a result of this uncertainty, we face the potential for reputational risk, deposit outflows, increased costs and competition for liquidity, and increased credit risk which, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operations. ​ Our operational systems and networks have been, and will continue to be, subject to an increasing risk of continually evolving cybersecurity or other technological risks, which could result in a loss of customer business, financial liability, regulatory penalties, damage to our reputation or the disclosure of confidential information. ​ We rely heavily on communications and information systems to conduct our business and maintain the security of confidential information and complex transactions, which subjects us to an increasing risk of cyber incidents and threats of cyber attacks from these activities due to a combination of new technologies and the increasing use of the Internet to conduct financial transactions, including the usage of artificial intelligence and automation, as well as a potential failure, interruption or breach in the security of these systems, including those that could result from attacks or planned changes, upgrades and maintenance of these systems.
In addition, a default under the indentures governing the Senior and Subordinated Notes could trigger a cross default under the agreements governing our existing and future indebtedness.
In addition, a default under the indentures governing the Subordinated Notes could trigger a cross default under the agreements governing our existing and future indebtedness.
New issuances in the municipal market by cities, counties, school districts, state and other governmental agencies, airports, healthcare institutions, institutions of higher education and other clients that the public finance services line of business serves can be subject to significant fluctuations based on factors such as changes in interest rates, property tax bases, budget pressures on certain issuers caused by uncertain economic times and other factors.
New issuances in the municipal market by cities, counties, school districts, state and other governmental agencies, airports, healthcare institutions, institutions of 41 Table of Contents higher education and other clients that the public finance services line of business serves can be subject to significant fluctuations based on factors such as changes in interest rates, property tax bases, budget pressures on certain issuers caused by uncertain economic times and other factors.
Any computer or communications system failure or decrease in computer system performance that causes interruptions in our operations could have a material adverse effect on our business, financial condition, results of operations or cash flows. ​ Climate change could adversely affect our business and performance, including indirectly through impacts on our customers. ​ Concerns over the long-term impacts of climate change have led, and will continue to lead, to governmental efforts in the United States to mitigate those impacts.
Any computer or communications system failure or decrease in computer system performance that causes interruptions in our operations could have a material adverse effect on our business, financial condition, results of operations or cash flows. ​ 37 Table of Contents Climate change could adversely affect our business and performance, including indirectly through impacts on our customers. ​ Concerns over the long-term impacts of climate change have led, and will continue to lead, to governmental efforts in the United States to mitigate those impacts.
Further, as a strategic response to changes in the competitive environment, our broker-dealer business may from time to time make certain pricing, service or marketing decisions that also could materially and adversely affect our business and results of operations. ​ Our mortgage origination business faces vigorous competition from banks and other financial institutions, including large financial institutions as well as independent mortgage banking companies, commercial banks, savings banks and 46 Table of Contents savings and loan associations.
Further, as a strategic response to changes in the competitive environment, our broker-dealer business may from time to time make certain pricing, service or marketing decisions that also could materially and adversely affect our business and results of operations. ​ Our mortgage origination business faces vigorous competition from banks and other financial institutions, including large financial institutions as well as independent mortgage banking companies, commercial banks, savings banks and savings and loan associations.
This could affect our growth, profitability and financial condition, including liquidity. ​ The indentures governing the Senior and Subordinated Notes contain, and any instruments governing future indebtedness would likely contain, restrictions that limit our flexibility in operating our business. ​ The indentures governing the Senior and Subordinated Notes contain, and any instruments governing future indebtedness would likely contain, a number of covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things: ​ ● dispose of, or issue voting stock of, certain subsidiaries; or ● incur or permit to exist any mortgage, pledge, encumbrance or lien or charge on the capital stock of certain subsidiaries. ​ Any of these restrictions could limit our ability to plan for or react to market conditions and could otherwise restrict corporate activities.
This could affect our growth, profitability and financial condition, including liquidity. ​ 45 Table of Contents The indentures governing the Subordinated Notes contain, and any instruments governing future indebtedness would likely contain, restrictions that limit our flexibility in operating our business. ​ The indentures governing the Subordinated Notes contain, and any instruments governing future indebtedness would likely contain, a number of covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things: ​ ● dispose of, or issue voting stock of, certain subsidiaries; or ● incur or permit to exist any mortgage, pledge, encumbrance or lien or charge on the capital stock of certain subsidiaries. ​ Any of these restrictions could limit our ability to plan for or react to market conditions and could otherwise restrict corporate activities.
An increasing size of our MSR portfolio may increase our interest rate risk and correspondingly, the volatility of our earnings, especially if we cannot adequately hedge the interest rate risk relating to our MSR assets. An increased size of our MSR portfolio could result in us carrying significant asset balances.
An increasing size of our MSR portfolio may increase our interest rate risk and correspondingly, the volatility of our earnings, especially if we cannot adequately hedge the interest rate risk relating to our MSR assets. ​ If we increase the size of our MSR portfolio, it could result in us carrying significant asset balances.
We seek to distinguish ourselves from our competitors through our commitment to personalized customer service and responsiveness to customer needs while providing a range of competitive mortgage loan products and services. ​ Overall, competition among providers of financial products and services continues to increase as technological advances have lowered the barriers to entry for financial technology companies, with consumers having the opportunity to select from a growing variety of traditional and nontraditional alternatives, including online checking, savings and brokerage accounts, online lending, online insurance underwriters, crowdfunding, digital wallets, and money transfer services.
We seek to distinguish ourselves from our competitors through our commitment to personalized customer service and responsiveness to customer needs while providing a range of competitive mortgage loan products and services. ​ Overall, competition among providers of financial products and services continues to increase as technological advances, including the rise of artificial intelligence and automation, have lowered the barriers to entry for financial technology companies, with consumers having the opportunity to select from a growing variety of traditional and nontraditional alternatives, including online checking, savings and brokerage accounts, online lending, online insurance underwriters, crowdfunding, digital wallets, and money transfer services.
A failure by the banking segment to have adequate risk management policies, procedures and controls could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which, accordingly, could have a material adverse effect on the Company’s business, financial condition and results of operations. ​ Our business and results of operations may be adversely affected by unpredictable economic, market and business conditions. ​ Our business and results of operations are affected by general economic, market and business conditions.
A failure by the banking segment to have adequate risk management policies, procedures and controls could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which, accordingly, could have a material adverse effect on the Company’s business, financial condition and results of operations. ​ 32 Table of Contents Our business and results of operations may be adversely affected by unpredictable economic, market and business conditions. ​ Our business and results of operations are affected by general economic, market and business conditions.
Prolonged litigation producing significant legal expenses or a substantial settlement or adverse judgment could have a material adverse effect on our business, financial condition, results of operations or cash flows. 42 Table of Contents ​ Because we may use a substantial portion of our remaining excess capital to make acquisitions or effect a business combination, we may become subject to risks inherent in pursuing and completing any such acquisitions or business combination. ​ We may make acquisitions or effect business combinations with a substantial portion of our remaining excess capital.
Prolonged litigation producing significant legal expenses or a substantial settlement or adverse judgment could have a material adverse effect on our business, financial condition, results of operations or cash flows. ​ Because we may use a substantial portion of our remaining excess capital to make acquisitions or effect a business combination, we may become subject to risks inherent in pursuing and completing any such acquisitions or business combination. ​ We may make acquisitions or effect business combinations with a substantial portion of our remaining excess capital.
We may not be able to consummate those dispositions for fair market value or at all. The indentures governing the Senior and Subordinated Notes may restrict, or market or business conditions may limit, our ability to avail ourselves of some or all of these options.
We may not be able to consummate those dispositions for fair market value or at all. The indentures governing the Subordinated Notes may restrict, or market or business conditions may limit, our ability to avail ourselves of some or all of these options.
Any failure to comply with these covenants could result in a default under the indentures governing the Senior and Subordinated Notes. Upon a default, holders of the Senior and Subordinated Notes have the ability ultimately to force us into bankruptcy or liquidation, subject to the indentures governing the Senior and Subordinated Notes.
Any failure to comply with these covenants could result in a default under the indentures governing the Subordinated Notes. Upon a default, holders of the Subordinated Notes have the ability ultimately to force us into bankruptcy or liquidation, subject to the indentures governing the Subordinated Notes.
Further, our mortgage warehousing activities subject us to credit risk during the period between funding by the Bank and when the mortgage company sells the loan to a secondary investor. ​ 36 Table of Contents Our broker-dealer business is subject to credit risk if securities prices decline rapidly because the value of our collateral could fall below the amount of the indebtedness it secures.
Further, our mortgage warehousing activities subject us to credit risk during the period between funding by the Bank and when the mortgage company sells the loan to a secondary investor. ​ Our broker-dealer business is subject to credit risk if securities prices decline rapidly because the value of our collateral could fall below the amount of the indebtedness it secures.
At the conclusion of the annual assessment, we determined that as of October 1, 2023 it was more likely than not that the fair value of goodwill and other intangible assets exceeded their respective carrying values.
At the conclusion of the annual assessment, we determined that as of October 1, 2024 it was more likely than not that the fair value of goodwill and other intangible assets exceeded their respective carrying values.
Consequently, we also may need to make further investments to support the acquired or combined company and may have difficulty identifying and acquiring the appropriate resources. ​ We may enter, through acquisitions or a business combination, into new lines of business or initiate new service offerings subject to the restrictions imposed upon us as a regulated financial holding company.
Consequently, we also may need to make further investments to support the acquired or combined company and may have difficulty identifying and acquiring the appropriate resources. ​ 43 Table of Contents We may enter, through acquisitions or a business combination, into new lines of business or initiate new service offerings subject to the restrictions imposed upon us as a regulated financial holding company.
Our operating results may not be sufficient to service our indebtedness or to fund our other expenditures and we may not be able to obtain financing to meet these requirements. ​ 45 Table of Contents Risks Related to our Industry ​ The soundness of other financial institutions could adversely affect our business. ​ Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions.
Our operating results may not be sufficient to service our indebtedness or to fund our other expenditures, and we may not be able to obtain financing to meet these requirements. ​ Risks Related to our Industry ​ The soundness of other financial institutions could adversely affect our business. ​ Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions.
At December 31, 2023, an aggregate of 76% of the real estate loans in our loan portfolio, and included within the commercial real estate and 1-4 family residential portfolio segments, were secured by properties in Texas.
At December 31, 2024, an aggregate of 76% of the real estate loans in our loan portfolio, and included within the commercial real estate and 1-4 family residential portfolio segments, were secured by properties in Texas.
Even if we implement these procedures, however, we cannot assure you that we will be fully protected from a cybersecurity incident, the occurrence of which could adversely affect our reputation and financial condition. ​ Our banking segment is subject to risk arising from conditions in the commercial real estate market and may be adversely affected by weaknesses in the commercial real estate market. ​ As of December 31, 2023, commercial real estate loans comprised approximately 39% of our banking segment’s loan portfolio.
Even if we implement these procedures, however, we cannot assure you that we will be fully protected from a cybersecurity incident, the occurrence of which could adversely affect our reputation and financial condition. ​ Our banking segment is subject to risk arising from conditions in the commercial real estate market and may be adversely affected by weaknesses in the commercial real estate market. ​ As of December 31, 2024, commercial real estate loans comprised approximately 40% of our banking segment’s loan portfolio.
For example, several aspects of the Dodd-Frank Act have affected our business, 47 Table of Contents including, without limitation, increased capital requirements, increased mortgage regulation, restrictions on proprietary trading in securities, restrictions on investments in hedge funds and private equity funds, executive compensation restrictions, potential federal oversight of the insurance industry and disclosure and reporting requirements.
For example, several aspects of the Dodd-Frank Act have affected our business, including, without limitation, increased capital requirements, increased mortgage regulation, restrictions on proprietary trading in securities, restrictions on investments in hedge funds and private equity funds, executive compensation restrictions, potential federal oversight of the insurance industry and disclosure and reporting requirements.
Conversely, a decrease in the general level of interest rates, among other things, may lead to increased competition for mortgage loan origination business. ​ As a result of these variables, our results of operations for any single quarter are not necessarily indicative of the results that may be achieved for a full fiscal year. ​ The financial services industry is characterized by rapid technological change, and if we fail to keep pace, our business may suffer. ​ The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services.
Conversely, a decrease in the general level of interest rates, among other things, may lead to increased competition for mortgage loan origination business. ​ As a result of these variables, our results of operations for any single quarter are not necessarily indicative of the results that may be achieved for a full fiscal year. ​ The financial services industry is characterized by rapid technological change, and if we fail to keep pace, our business may suffer. ​ The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services, including increased usage of artificial intelligence and automation.
Rapid or significant market fluctuations could adversely affect our business, financial condition, results of operations and cash flow. ​ In addition, during periods of market disruption, it may be difficult to value certain assets if comparable sales become less frequent or market data becomes less observable.
Rapid or significant market fluctuations could adversely affect our business, financial condition, results of operations and cash flow. ​ 38 Table of Contents In addition, during periods of market disruption, it may be difficult to value certain assets if comparable sales become less frequent or market data becomes less observable.
Our bylaws include a provision prohibiting holders that do not or have not owned, continuously for at least one year as of the record date of such proposed meeting, capital stock representing at least 15% of the shares entitled to be voted at such proposed meeting, from calling a special meeting of stockholders.
Our bylaws include a provision prohibiting holders that do not or have not owned, continuously for at least one year as of the record date of such proposed 50 Table of Contents meeting, capital stock representing at least 15% of the shares entitled to be voted at such proposed meeting, from calling a special meeting of stockholders.
Generally, our nonperforming loans and other real estate owned (“OREO”) reflect operating difficulties of individual borrowers and weaknesses in the economies of the markets we serve. ​ Under the acquisition method of accounting requirements, we were required to estimate the fair value of the loan portfolios acquired in each of the PlainsCapital Merger, the Federal Deposit Insurance Corporation (“FDIC”) -assisted transaction (the “FNB Transaction”) whereby the Bank acquired certain assets and assumed certain liabilities of FNB, the acquisition of SWS Group, Inc. in a stock and cash transaction (the “SWS Merger”) and the acquisition of The Bank of River Oaks (“BORO”) in an all-cash transaction (“BORO Acquisition,” and collectively with the PlainsCapital Merger, FNB Transaction and the SWS Merger, the “Bank Transactions”) as of the applicable acquisition date and write down the recorded value of each such acquired portfolio to the applicable estimate.
Generally, our nonperforming loans and other real estate owned (“OREO”) reflect operating difficulties of individual borrowers and weaknesses in the economies of the markets we serve. ​ Under the acquisition method of accounting requirements, we were required to estimate the fair value of the loan portfolios acquired in each of the PlainsCapital Merger, the FDIC-assisted transaction (the “FNB Transaction”) whereby the Bank acquired certain assets and assumed certain liabilities of FNB, the acquisition of SWS Group, Inc. in a stock and cash transaction (the “SWS Merger”) and the acquisition of The Bank of River Oaks (“BORO”) in an all-cash transaction (“BORO Acquisition,” and collectively with the PlainsCapital Merger, FNB Transaction and the SWS Merger, the “Bank Transactions”) as of the applicable acquisition date and write down the recorded value of each such acquired portfolio to the applicable estimate.
Certain of our variable rate loans only provide for resets of interest rates periodically, which can result in significant periods of time between resets in loan rates, which can negatively impact our margins and 32 Table of Contents profitability. Further, a portion of our adjustable rate loans have interest rate floors at or above the loan's contractual interest rate.
Certain of our variable rate loans only provide for resets of interest rates periodically, which can result in significant periods of time between resets in loan rates, which can negatively impact our margins and profitability. Further, a portion of our adjustable rate loans have interest rate floors at or above the loan's contractual interest rate.
Any material misstatements could require a restatement of our consolidated financial statements, cause us to fail to meet our reporting obligations or cause investors to lose confidence in our reported financial information, leading to a decline in the market value of our securities. ​ We ultimately may write-off goodwill and other intangible assets resulting from business combinations. ​ As a result of purchase accounting in connection with acquisitions, our consolidated balance sheet at December 31, 2023, included goodwill of $267.4 million and other intangible assets, net of accumulated amortization, of $8.5 million.
Any material misstatements could require a restatement of our consolidated financial statements, cause us to fail to meet our reporting obligations or cause investors to lose confidence in our reported financial information, leading to a decline in the market value of our securities. ​ We ultimately may write-off goodwill and other intangible assets resulting from business combinations. ​ As a result of purchase accounting in connection with acquisitions, our consolidated balance sheet at December 31, 2024, included goodwill of $267.4 million and other intangible assets, net of accumulated amortization, of $6.6 million.
The issuance of preferred stock could also result in a series of securities outstanding that would have preferences over the common stock with respect to dividends and in liquidation. ​ Our common stock price may experience substantial volatility, which may affect your ability to sell our common stock at an advantageous price. ​ Price volatility of our common stock may affect your ability to sell our common stock at an advantageous price.
The issuance of preferred stock could also result in a series of securities outstanding that would have preferences over the common stock with respect to dividends and in liquidation. 49 Table of Contents ​ Our common stock price may experience substantial volatility, which may affect your ability to sell our common stock at an advantageous price. ​ Price volatility of our common stock may affect your ability to sell our common stock at an advantageous price.
Our computer systems, software and networks may be adversely affected by cyber incidents such as 30 Table of Contents unauthorized access; loss or destruction of data (including confidential client information); account takeovers; unavailability of service; computer viruses or other malicious code; cyber attacks; and other events.
Our computer systems, software and networks may be adversely affected by cyber incidents such as unauthorized access; loss or destruction of data (including confidential client information); account takeovers; unavailability of service; computer viruses or other malicious code; cyber attacks; and other events.
If we ever became subject to significant environmental liabilities, our business, financial condition, liquidity and results of operations could be harmed. ​ 43 Table of Contents Risks Related to Our Indebtedness ​ Our indebtedness may affect our ability to operate our business, and may have a material adverse effect on our financial condition and results of operations.
If we ever became subject to significant environmental liabilities, our business, financial condition, liquidity and results of operations could be harmed. ​ Risks Related to Our Indebtedness ​ Our indebtedness may affect our ability to operate our business, and may have a material adverse effect on our financial condition and results of operations.
Regulatory approvals could be delayed, impeded, restrictively conditioned or denied due to existing or new regulatory issues we have, or may have, with regulatory agencies, including, without limitation, issues related to Bank Secrecy Act compliance, Community Reinvestment Act issues, fair lending laws, fair housing laws, consumer protection laws, unfair, deceptive, or abusive acts or practices regulations and other similar laws and regulations.
Regulatory approvals could be delayed, impeded, restrictively conditioned or denied due to existing or new regulatory issues we have, or may have, with regulatory agencies, including, without limitation, issues related to the Bank Holding Company Act, the Bank Merger Act, Bank Secrecy Act compliance, Community Reinvestment Act issues, fair lending laws, fair housing laws, consumer protection laws, unfair, deceptive, or abusive acts or practices regulations and other similar laws and regulations.
In the event that we conclude that all or a portion of our goodwill 40 Table of Contents and other intangible assets are impaired, a non-cash charge for the respective amount of such impairment would be recorded to earnings.
In the event that we conclude that all or a portion of our goodwill and other intangible assets are impaired, a non-cash charge for the respective amount of such impairment would be recorded to earnings.
Accordingly, if the Bank and Securities Holdings are unable to make cash distributions to us, then we may be unable to satisfy our operating expense obligations or make interest payments on our debt obligations. ​ 37 Table of Contents Our broker-dealer business is subject to various risks associated with the securities industry. ​ Our broker-dealer business is subject to uncertainties that are common in the securities industry.
Accordingly, if the Bank and Securities Holdings are unable to make cash distributions to us, then we may be unable to satisfy our operating expense obligations or make interest payments on our debt obligations. ​ Our broker-dealer business is subject to various risks associated with the securities industry. ​ Our broker-dealer business is subject to uncertainties that are common in the securities industry.
In the future, events such as these bank failures could have an adverse effect on our financial condition and results of operations, either directly or through an adverse impact on certain of our customers. ​ 29 Table of Contents In response to these failures and the resulting market reaction, the Secretary of the Treasury approved actions enabling the FDIC to complete its resolutions of the failed banks in a manner that fully protects depositors by utilizing the Deposit Insurance Fund, including the use of Bridge Banks to assume all of the deposit obligations of the failed banks, while leaving unsecured lenders and equity holders of such institutions exposed to losses.
In the future, events such as these bank failures or negative news or the public perception thereof, could have an adverse effect on our financial condition and results of operations, either directly or through an adverse impact on certain of our customers. ​ 30 Table of Contents In response to these failures and the resulting market reaction, the Secretary of the Treasury approved actions enabling the FDIC to complete its resolutions of the failed banks in a manner that fully protects depositors by utilizing the Deposit Insurance Fund, including the use of Bridge Banks to assume all of the deposit obligations of the failed banks, while leaving unsecured lenders and equity holders of such institutions exposed to losses.
An MSR is the right to service a mortgage loan – collect principal, interest and escrow amounts – for a fee. We measure and carry all of our residential MSR assets using the fair value measurement method.
An MSR is the right to service a mortgage loan – collect principal, 40 Table of Contents interest and escrow amounts – for a fee. We measure and carry all of our residential MSR assets using the fair value measurement method.
These changes become less predictable, yet more likely to occur, following the transition of power from one presidential administration to another, especially as in 2021, when it involves a change in the governing political party.
These changes become less predictable, yet more likely to occur, following the transition of power from one presidential administration to another, especially as occurred in 2025, when it involves a change in the governing political party.
Our ability to make scheduled debt payments, to refinance our obligations with respect to our indebtedness and to fund capital and non-capital expenditures necessary to maintain the condition of our operating assets and properties, as well as to provide capacity for the growth of our business, depends on our financial and operating performance, which, in turn, is subject to prevailing economic conditions and financial, business, competitive, legal and other factors. ​ Subject to the restrictions in the indentures governing the Senior Notes, 2030 Subordinated Notes and 2035 Subordinated Notes (collectively, the “Senior and Subordinated Notes”), we may incur significant additional indebtedness, including secured indebtedness.
Our ability to make scheduled debt payments, to refinance our obligations with respect to our indebtedness and to fund capital and non-capital expenditures necessary to maintain the condition of our operating assets and properties, as well as to provide capacity for the growth of our business, depends on our financial and operating performance, which, in turn, is subject to prevailing economic conditions and financial, business, competitive, legal and other factors. ​ Subject to the restrictions in the indentures governing the Subordinated Notes, we may incur significant additional indebtedness, including secured indebtedness.
Loans that do not meet the ability-to-repay standard can be 48 Table of Contents challenged in court by borrowers who default and the absence of ability-to-repay status can be used against a lender in foreclosure proceedings.
Loans that do not meet the ability-to-repay standard can be challenged in court by borrowers who default and the absence of ability-to-repay status can be used against a lender in foreclosure proceedings.
Difficulties associated with potential acquisitions that may result from these factors could have a material adverse effect on our business, financial condition and results of operations. ​ Legal and Regulatory Risks ​ We are subject to extensive supervision and regulation that could restrict our activities and impose financial requirements or limitations on the conduct of our business and limit our ability to generate income. ​ We are subject to extensive federal and state regulation and supervision, including that of the Federal Reserve Board, the Texas Department of Banking, the FDIC, the CFPB, the SEC and FINRA.
Difficulties associated with potential acquisitions that may result from these factors could have a material adverse effect on our business, financial condition and results of operations. 47 Table of Contents ​ We are subject to extensive supervision and regulation that could restrict our activities and impose financial requirements or limitations on the conduct of our business and limit our ability to generate income. ​ We are subject to extensive federal and state regulation and supervision, including that of the Federal Reserve Board, the Texas Department of Banking, the FDIC, the CFPB, the SEC and FINRA.
During 2023, we declared and paid cash dividends of $0.64 per common share. ​ In January 2023, our board of directors authorized a new stock repurchase program through January 2024, pursuant to which we are authorized to repurchase, in the aggregate, up to $75.0 million of our outstanding common stock.
During 2024, we declared and paid cash dividends of $0.68 per common share. ​ In January 2024, our board of directors authorized a new stock repurchase program through January 2025, pursuant to which we are authorized to repurchase, in the aggregate, up to $75.0 million of our outstanding common stock.
Competition for deposits and in providing lending products and services to consumers and businesses in our market area is intense and pricing is important. Other factors encountered in competing for savings deposits are convenient office locations, interest rates and fee structures of products offered.
Competition for deposits and in providing lending products and services to consumers and businesses in our market area continues to be competitive and pricing is important. Other factors encountered in competing for savings deposits are convenient office locations, interest rates and fee structures of products offered.
These shares were returned to the pool of authorized but unissued shares of common stock. ​ In January 2024, our board of directors authorized a new stock repurchase program through January 2025, pursuant to which we are authorized to repurchase, in the aggregate, up to $75.0 million of our outstanding common stock.
These shares were returned to the pool of authorized but unissued shares of common stock. ​ In January 2025, our board of directors authorized a new stock repurchase program through January 2026, pursuant to which we are authorized to repurchase, in the aggregate, up to $100.0 million of our outstanding common stock.
These headwinds, coupled with inflationary pressures associated with compensation, occupancy and software costs within our business segments during 2022 and 2023 have had, and are expected to continue to have, an adverse impact on our operating results during 2024.
These headwinds, coupled with inflationary pressures associated with compensation, occupancy and software costs within our business segments since 2022 have had, and are expected to continue to have, an adverse impact on our operating results during 2025.
These may include significant time delays, cost overruns, loss of key personnel, technological problems, processing failures, distraction of management and other adverse developments.
These may include significant time delays, cost overruns, loss of key personnel, technological problems, processing failures, distraction of 35 Table of Contents management and other adverse developments.
Accordingly, you should be capable of affording the loss of any investment in our common stock. ​ Item 1B. Unresolved Staff Comments . ​ None. ​
Accordingly, you should be capable of affording the loss of any investment in our common stock. ​ Item 1B. Unresolved Staff Comments . ​ None. 51 Table of Contents
For example, in 2018, the State of California adopted the California Consumer Privacy Act of 2018, which imposes requirements on companies operating in California and provides consumers with a private right of action if covered companies suffer a data breach related to their failure to implement reasonable security measures.
For example, in 2018, the State of California adopted the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act (“CPRA”) in 2023, which imposes requirements on companies operating in California and provides consumers with a private right of action if covered companies suffer a data breach related to their failure to implement reasonable security measures.
As of December 31, 2023, approximately 9% of our total loans’ rates are floored, with most expected to reprice to the loan’s contractual rate at the next reset date.
As of December 31, 2024, approximately 10% of our total loans’ rates are floored, with most expected to reprice to the loan’s contractual rate at the next reset date.
Treasury bond yields and 3-month yields, could adversely impact the net interest income of our banking segment as the spread between interest-earning assets and interest-bearing liabilities becomes further compressed. ​ As of December 31, 2023, approximately 57% of our loans were advanced to our customers on a variable or adjustable-rate basis and approximately 43% of our loans were advanced to our customers on a fixed-rate basis.
Treasury bond yields and 3-month yields, could adversely 33 Table of Contents impact the net interest income of our banking segment as the spread between interest-earning assets and interest-bearing liabilities becomes further compressed. ​ As of December 31, 2024, approximately 58% of our loans were advanced to our customers on a variable or adjustable-rate basis and approximately 42% of our loans were advanced to our customers on a fixed-rate basis.
We may incur additional indebtedness, including secured indebtedness. ​ At December 31, 2023, on a consolidated basis, we had total deposits of $11.1 billion and other indebtedness of $1.2 billion, including $150.0 million in aggregate principal amount of 5% senior notes due 2025 (the “Senior Notes”), $50.0 million aggregate principal amount of 5.75% fixed-to-floating rate subordinated notes due 2030 (the “2030 Subordinated Notes”) and $150.0 million aggregate principal amount of 6.125% fixed-to-floating rate subordinated notes due 2035 (the “2035 Subordinated Notes”).
We may incur additional indebtedness, including secured indebtedness. ​ At December 31, 2024, on a consolidated basis, we had total deposits of $11.1 billion and other indebtedness of $1.2 billion, including $150.0 million in aggregate principal amount of 5% senior notes due 2025 (the “Senior Notes”), which have since been redeemed in full, $50.0 million aggregate principal amount of 5.75% fixed-to-floating rate subordinated notes due 2030 (the “2030 Subordinated Notes”) and $150.0 million aggregate principal amount of 6.125% fixed-to-floating rate subordinated notes due 2035 (the “2035 Subordinated Notes” and, collectively with the 2030 Subordinated Notes, the “Subordinated Notes”).
Changes in interest rates may impact our net interest income in our banking segment as well as the valuation of our assets and liabilities in each of our segments.
Changes in interest rates have in the past and may continue to impact our net interest income in our banking segment in the future as well as the valuation of our assets and liabilities in each of our segments.
Many of these transactions expose us to credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated when we hold collateral that cannot be realized or is liquidated at prices not sufficient to recover the full amount of the receivable due to us.
In addition, our credit risk may be exacerbated when we hold collateral that cannot be realized or is liquidated at prices not sufficient to recover the full amount of the receivable due to us.
During 2023, 28.9% and 7.9% of our mortgage loans originated (by dollar volume) were collateralized by properties located in Texas and California, respectively. Also, in our broker-dealer segment, 79% of public finance services net revenues were from entities located in Texas, and 86% of retail brokerage service net revenues were generated through locations in Texas and California.
During 2024, 31.5% and 7.7% of our mortgage loans originated (by dollar volume) were collateralized by properties located in Texas and California, respectively. Also, in our broker-dealer segment, 76% of public finance services net revenues were from entities located in Texas, and 87% of retail brokerage service net revenues were generated through locations in Texas and California.
This competition may reduce or limit our margins on banking services, reduce our market share and adversely affect our results of operations and financial condition. ​ The financial advisory and investment banking industries also are intensely competitive industries and will likely remain competitive.
Our profitability depends on our ability to compete effectively in these markets. This competition may reduce or limit our margins on banking services, reduce our market share and adversely affect our results of operations and financial condition. ​ The financial advisory and investment banking industries also are intensely competitive industries and will likely remain competitive.
These laws and regulations could result in increased operating expenses or increase our exposure to the risk of litigation or regulatory inquiries or proceedings. ​ Although we devote significant resources to maintain and regularly upgrade our systems and networks to safeguard critical business applications, there is no guarantee that these measures or any other measures can provide absolute security.
Congress with respect to new federal data privacy and security laws to which we would become subject if enacted. ​ These upcoming and evolving laws and regulations could result in increased operating expenses or increase our exposure to the risk of litigation or regulatory inquiries or proceedings. ​ Although we devote significant resources to maintain and regularly upgrade our systems and networks to safeguard critical business applications, there is no guarantee that these measures or any other measures can provide absolute security.
Fair value is determined as the present value of estimated future net servicing income, calculated based on a number of variables, including assumptions about the likelihood of prepayment by borrowers. ​ Current trends of rising interest rates have resulted in an increased valuation of the MSR asset, however one of the principal risks associated with MSR assets is that in a declining interest rate environment, they will likely lose a substantial portion of their value as a result of higher than anticipated prepayments.
Fair value is determined as the present value of estimated future net servicing income, calculated based on a number of variables, including assumptions about the likelihood of prepayment by borrowers, and as a result, the value of our MSR assets fluctuates due to changes in interest rates, which may increase volatility of earnings. ​ The rising interest rate environment that began in 2022 and continued through 2023 resulted in an increased valuation of the MSR asset, however one of the principal risks associated with MSR assets is that in a declining interest rate environment, they will likely lose a substantial portion of their value as a result of higher than anticipated prepayments.
Inflationary pressures are currently expected to remain elevated throughout 2024. Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses.
While the rise in inflation has slowed during the latter half of 2024, inflationary pressures are still expected to remain elevated throughout 2025. Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses.
Any failure to predict and prepare for changes in interest rates, or adjust for the consequences of these changes, may adversely affect our earnings and capital levels and overall results of operations and financial condition. ​ I nflationary pressures and rising prices may affect our results of operations and financial condition. ​ Inflation rose sharply at the end of 2021 and has continued rising in 2022 and 2023 at levels not seen for over 40 years.
Any failure to predict and prepare for changes in interest rates, or adjust for the consequences of these changes, may adversely affect our earnings and capital levels and overall results of operations and financial condition. ​ 34 Table of Contents I nflationary pressures and rising prices may affect our results of operations and financial condition. ​ Inflation rose sharply at the end of 2021 and continued rising into 2024 at elevated levels.
Specifically, 28%, 16%, 9% and 5% of the real estate loans were secured by 34 Table of Contents properties located within the Dallas-Fort Worth, Austin, Houston and Brownsville-Harlingen-McAllen markets, respectively. Substantially all of these loans are made to borrowers who live and conduct business in Texas.
Specifically, 28%, 17%, 8% and 5% of the real estate loans were secured by properties located within the Dallas-Fort Worth, Austin, Houston and San Antonio markets, respectively. Substantially all of these loans are made to borrowers who live and conduct business in Texas.
Such a charge would have no impact on tangible capital or regulatory capital. ​ The accuracy of our financial statements and related disclosures could be affected if we are exposed to actual conditions different from the judgments, assumptions or estimates used in our critical accounting estimates. ​ The preparation of financial statements and related disclosure in conformity with GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes.
If we increase the size of our MSR assets in the future, these risks could increase. ​ The accuracy of our financial statements and related disclosures could be affected if we are exposed to actual conditions different from the judgments, assumptions or estimates used in our critical accounting estimates. ​ The preparation of financial statements and related disclosure in conformity with GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes.
Between August 2019 and March 2020, the Federal Open Market Committee of the Federal Reserve Board decreased its target range for short-term interest rates by 200 basis points, while between March 2022 and December 2023, it raised interest rates by 525 basis points and indicated that further changes may occur in 2024.
Between August 2019 and March 2020, the Federal Open Market Committee of the Federal Reserve Board decreased its target range for the federal funds rate by 200 basis points, while between March 2022 and December 2023, it raised the target range for the federal funds rate by 525 basis points.
Direct competition for savings deposits also comes from other commercial bank and thrift institutions, money market mutual funds and corporate and government securities that may offer more attractive rates than insured depository institutions are willing to pay. Competition for loans is based on factors such as interest rates, loan origination fees and the range of services offered by the provider.
Direct competition for savings deposits also comes from other commercial bank and thrift institutions, money market mutual funds and corporate and government securities that may offer more attractive rates than insured depository institutions are willing to pay.
Until the consequences subside, we could be subject to negative effects on our businesses, results of operations and financial condition, as well as our regulatory capital and liquidity ratios. ​ Our risk management processes may not fully identify and mitigate exposure to the various risks that we face, including interest rate, credit, liquidity and market risk. ​ We continue to refine our risk management techniques, strategies and assessment methods on an ongoing basis.
As a result, our results of operations and financial condition may be materially adversely affected by a decrease in real estate market values. ​ Our risk management processes may not fully identify and mitigate exposure to the various risks that we face, including interest rate, credit, liquidity and market risk. ​ We continue to refine our risk management techniques, strategies and assessment methods on an ongoing basis.
When acting as an underwriter, our broker-dealer segment may be liable jointly and severally under federal, state and foreign securities laws for false and misleading statements 41 Table of Contents concerning the securities, or the issuer of the securities, that it underwrites.
When acting as an underwriter, our broker-dealer segment may be liable jointly and severally under federal, state and foreign securities laws for false and misleading statements concerning the securities, or the issuer of the securities, that it underwrites. We are sometimes brought into lawsuits in connection with our correspondent clearing business based on actions of our correspondents.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThis team is charged with the configuration, implementation and ongoing maintenance of the solutions that enhance our security posture. 51 Table of Contents ​ Managing Material Cybersecurity Risks ​ As a part of our overall risk management strategy, IT Risk conducts risk assessments on the technology environment as well as application systems implemented to support the various business functions of Hilltop based on the Gramm-Leach-Bliley Act guidance.
Biggest changeWe recognize the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity and availability of our data. ● Security Engineering plans, builds, and maintains technical controls and solutions that enhance our security posture that mitigate risk to the enterprise while assuring the integrity of the engineering design process. ​ Managing Material Cybersecurity Risks ​ As a part of our overall risk management strategy, Information Security Risk conducts risk assessments on the technology environment as well as application systems implemented to support the various business functions of Hilltop based on the Gramm-Leach-Bliley Act guidance.
Our program is supported by management and the board of directors. ​ Organizational Model ​ Our Information Security Department is comprised of three primary functions: ● Information Technology (“IT”) Risk assesses technology risks and controls, evaluates application systems’ conformance to internally defined and approved security standards, coordinates audits and examinations for IT and IT security, as well as tracks open risk issues and exceptions. ● IT Security defines security policies and standards, conducts security awareness and training, evaluates security configuration and assesses vulnerability risk. ● Security Operations utilizes security solutions to detect and respond to security threats and supports the end-user security needs.
Our program is supported by management and the board of directors. ​ Organizational Model ​ Our Information Security Department is comprised of four primary functions: ● Information Security Risk assesses technology risks and controls, evaluates application systems’ conformance to internally defined and approved security standards, coordinates audits and examinations for Information Technology (“IT”) and Information Security, as well as tracks open risk issues and exceptions. ● IT Security defines security policies and standards, conducts security awareness and training, evaluates security configuration and assesses vulnerability risk. ● Security Operations utilizes security solutions to detect and respond to security threats and supports the end-user security needs.
These briefings encompass a broad range of topics, including: ● Current cybersecurity landscape and emerging threats; ● Status of ongoing cybersecurity initiatives and strategies; ● Incident reports and learnings from any cybersecurity events; ● Vulnerability management, including software patching, reviews of risk accepted vulnerabilities (remediated, renewed and top risks) and trends related thereto; and ● Compliance with regulatory requirements and industry standards. ​ In addition to Risk Committee meetings, our CIO generally meets with executive management weekly to provide updates regarding current activities and areas of focus.
These briefings encompass a broad range of topics, including: ● Current cybersecurity landscape and emerging threats; ● Status of ongoing cybersecurity initiatives and strategies; ● Incident reports and learnings from any cybersecurity events; ● Vulnerability management, including software patching, reviews of risk accepted vulnerabilities (remediated, renewed and top risks) and trends related thereto; and ● Compliance with regulatory requirements and industry standards. ​ In addition to Risk Committee meetings, our CISO generally meets with executive management weekly to provide updates regarding current activities and areas of focus.
In 2023, additional assessments were completed utilizing the FFIEC Cybersecurity Assessment Tool and the Ransomware Self-Assessment Tool for the enterprise. ​ Engage Third-Parties on Risk Management ​ Recognizing the complexity and evolving nature of cybersecurity threats, Hilltop engages with a range of external experts, including cybersecurity assessors, consultants, and auditors in evaluating and testing our risk management systems.
In 2024, additional assessments were completed utilizing the FFIEC Cybersecurity Assessment Tool and the Ransomware Self-Assessment Tool for the enterprise. ​ Engage Third-Parties on Risk Management ​ Recognizing the complexity and evolving nature of cybersecurity threats, Hilltop engages with a range of external experts, including cybersecurity assessors, consultants and auditors in evaluating and testing our risk management systems.
For more information about the cybersecurity risks we face, see Item 1A., “Risk Factors — Our operational systems and networks have been, and will continue to be, subject to an increasing risk of continually evolving cybersecurity or other technological risks, which could result in a loss of customer business, financial liability, regulatory penalties, damage to our reputation or the disclosure of confidential information.” 52 Table of Contents ​ Governance ​ The board of directors is acutely aware of the critical nature of managing risks associated with cybersecurity threats.
For more information about the cybersecurity risks we face, see Item 1A., “Risk Factors — Our operational systems and networks have been, and will continue to be, subject to an increasing risk of continually evolving cybersecurity or other technological risks, which could result in a loss of customer business, financial liability, regulatory penalties, damage to our reputation or the disclosure of confidential information.” ​ Governance ​ The board of directors is acutely aware of the critical nature of managing risks associated with cybersecurity threats.
This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. To assist our information security team in such knowledge acquisition, we subscribe to certain services that provide us alerts on security incidents and threats. Our CIO oversees the implementation of, and the processes for, the regular monitoring of our information systems.
This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation and remediation of cybersecurity incidents. To assist our information security team in such knowledge acquisition, we subscribe to certain services that provide us alerts on security incidents and threats. Our CISO oversees the implementation of, and the processes for, the regular monitoring of our information systems.
IT then quantifies the incidents and risks that have been identified and reports to the Operations & Strategy Committee, which is comprised of executives from across the enterprise representing disciplines including compliance, regulatory, information technology, risk, finance and operations, if they meet certain thresholds.
Information Security then quantifies the incidents and risks that have been identified and reports to the Operations & Strategy Committee, which is comprised of executives from across the enterprise representing disciplines including compliance, regulatory, information technology, risk, finance, and operations, if they meet certain thresholds.
In the event of a potential or actual cybersecurity event, the CIO immediately notifies the General Counsel at which point the information security incident response plan is activated if warranted. The information security incident response plan provides the procedures for responding, including personnel required to be informed and updated.
In the event of a potential or actual cybersecurity event, the CISO immediately notifies the General Counsel at which point the information security incident response plan is activated if warranted. The information security incident response plan provides the procedures for responding, including personnel required to be informed and updated.
We also conduct cybersecurity tabletop exercises each year to ensure our processes and procedures align with our technical controls, and to ensure that the organization is prepared for a security-related event. ​ Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with our CIO.
We also conduct cybersecurity tabletop exercises each year to ensure our processes and procedures align with our technical controls, and to ensure that the organization is prepared for a security-related event. ​ Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with our CISO.
With over twenty years of experience in the field of cybersecurity, our CIO brings a wealth of expertise to his role. His background includes extensive experience in all facets of information technology and information security and is well-recognized within the industry.
With over twenty years of experience in the field of cybersecurity, our CISO brings a wealth of expertise to his role. His background includes extensive experience in all facets of information technology and information security and is well-recognized within the industry.
Additionally, at least every two years, we engage a firm to perform a red-team exercise for a simulated cybersecurity event. ​ Service Provider Oversight ​ HTH Procurement processes contract requests, contract renewals and onboard of vendors. Such process creates a single point of entry for all sourcing and contract requests.
Additionally, at least every two years, we engage a firm to perform a red-team exercise for a simulated cybersecurity event. ​ 52 Table of Contents Service Provider Oversight ​ HTH Procurement processes contract requests, contract renewals and onboard of vendors. Such process creates a single point of entry for all sourcing and contract requests.
Our CIO provides comprehensive briefings to the Risk Committee on a regular basis, with a minimum frequency of four times per year.
Our CISO provides comprehensive briefings to the Risk Committee on a regular basis, with a minimum frequency of four times per year.
Our Information Security Governance Committee allows for direct management reporting for IT Risk management, audit/examination report(s) review, and oversight of our IT Security strategy and daily Security Operations. 53 Table of Contents ​ Monitor Cybersecurity Incidents ​ Our CIO is continually informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques.
Our Information Security Governance Committee allows for direct management reporting for IT Risk management, audit/examination report(s) review, and oversight of our Information Security strategy and program, and daily Security Operations. ​ Monitor Cybersecurity Incidents ​ Our CISO is continually informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques.
The Risk Committee receives regular reports from our Chief Information Officer (“CIO”) and provides updates to the full board of directors at each regular meeting of the board of directors, The Risk Committee also reviews all information security plans and policies, which are then recommended to the full board of directors for its review and approval. ​ Management’s Role Managing Risk ​ Our CIO plays a pivotal role in informing the Risk Committee on cybersecurity risks and developments.
The Risk Committee also reviews all information security plans and policies, which are then recommended to the full board of directors for its review and approval. ​ 53 Table of Contents Management’s Role Managing Risk ​ Our CISO plays a pivotal role in informing the Risk Committee on cybersecurity risks and developments.
His in-depth knowledge and experience are instrumental in developing and executing our cybersecurity strategies. ​ Our CIO is responsible for our Information Security Program and our information security leaders report directly to our CIO.
His in-depth knowledge and experience are instrumental in developing and executing our cybersecurity strategies. ​ Our CISO is responsible for our Information Security Program and our information security leaders report directly to our CISO. We also maintain a standing committee, the Information Security Governance Committee, which consists of certain members of executive management, our CISO and information security leaders.
Removed
We recognize the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity and availability of our data. ​ Supporting these core information security functions is an Information Security Engineering team within our Engineering organization.
Added
The Risk Committee receives regular reports from our Chief Information Security Officer (“CISO”) and provides updates to the full board of directors at each regular meeting of the board of directors.
Removed
In order to maintain a separate reporting line for our information security leaders, we also maintain a standing committee, the Information Security Governance Committee, which consists of certain members of executive management and the information security leaders.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAt December 31, 2023, our banking segment conducted business at 62 locations throughout Texas, including four support facilities. The Bank leases 38 banking locations, including its principal offices, and owns the remaining 24 banking locations. ​ Broker-Dealer. At December 31, 2023, our broker-dealer segment conducted business from 40 locations in 16 states.
Biggest changeAt December 31, 2024, our banking segment conducted business at 59 locations throughout Texas, including four support facilities. The Bank leases 35 banking locations, including its principal offices, and owns the remaining 24 banking locations. ​ 54 Table of Contents Broker-Dealer. At December 31, 2024, our broker-dealer segment conducted business from 39 locations in 15 states.
Each of these locations is leased by Hilltop Securities. ​ Mortgage Origination. At December 31, 2023, our mortgage origination segment conducted business from over 210 locations in 45 states. Each of these locations is leased by PrimeLending. ​
Each of these locations is leased by Hilltop Securities. ​ Mortgage Origination. At December 31, 2024, our mortgage origination segment conducted business from over 182 locations in 46 states. Each of these locations is leased by PrimeLending. ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings . ​ For a description of material pending legal proceedings, see the discussion set forth under the heading “Legal Matters” in Note 18 to our Consolidated Financial Statements, which is incorporated by reference herein. ​ Item 4. Mine Safety Disclosures . ​ Not applicable. 54 Table of Contents PART I I ​
Biggest changeItem 3. Legal Proceedings . ​ For a description of material pending legal proceedings, see the discussion set forth under the heading “Legal Matters” in Note 18 to our Consolidated Financial Statements, which is incorporated by reference herein. ​ Item 4. Mine Safety Disclosures . ​ Not applicable. 55 Table of Contents PART I I ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAdditional information concerning our stock-based compensation plans is presented in Note 20, Stock-Based Compensation, in the notes to our consolidated financial statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity Compensation Plan Information ​ ​ ​ ​ Number of securities ​ ​ Number of securities ​ ​ ​ ​ remaining available for ​ ​ to be issued upon ​ Weighted-average ​ future issuance under ​ ​ exercise of ​ exercise price of ​ equity compensation plans ​ ​ outstanding options, ​ outstanding options, ​ (excluding securities Plan Category ​ warrants and rights ​ warrants and rights ​ reflected in first column) Equity compensation plans approved by security holders* — ​ $ — 1,995,985 ​ Total — ​ $ — 1,995,985 ​ ​ * Represents shares available for future issuance under the Hilltop Holdings Inc. 2020 Equity Incentive Plan (the “2020 Plan”). ​ Issuer Repurchases of Equity Securities ​ The following table details our repurchases of shares of common stock during the three months ended December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) October 1 - October 31, 2023 — ​ $ — ​ — ​ $ 70,501,138 November 1 - November 30, 2023 20,001 ​ ​ 29.48 ​ 20,001 ​ ​ 69,911,473 December 1 - December 31, 2023 200 ​ ​ 29.50 ​ 200 ​ ​ 69,905,574 Total ​ 20,201 ​ $ 29.48 ​ 20,201 ​ ​ ​ 55 Table of Contents (1) On January 26, 2023, we announced that our board of directors authorized a new stock repurchase program through January 2024, pursuant to which we are authorized to repurchase, in the aggregate, up to $75.0 million of our outstanding common stock, inclusive of repurchases to offset dilution related to grants of stock-based compensation.
Biggest changeAdditional information concerning our stock-based compensation plans is presented in Note 20, Stock-Based Compensation, in the notes to our consolidated financial statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity Compensation Plan Information ​ ​ ​ ​ Number of securities ​ ​ Number of securities ​ ​ ​ ​ remaining available for ​ ​ to be issued upon ​ Weighted-average ​ future issuance under ​ ​ exercise of ​ exercise price of ​ equity compensation plans ​ ​ outstanding options, ​ outstanding options, ​ (excluding securities Plan Category ​ warrants and rights ​ warrants and rights ​ reflected in first column) Equity compensation plans approved by security holders* — ​ $ — 1,416,696 ​ Total — ​ $ — 1,416,696 ​ ​ * Represents shares available for future issuance under the Hilltop Holdings Inc. 2020 Equity Incentive Plan (the “2020 Plan”). ​ 56 Table of Contents Issuer Repurchases of Equity Securities ​ The following table details our repurchases of shares of common stock during the three months ended December 31, 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) October 1 - October 31, 2024 — ​ $ — ​ — ​ $ 55,152,099 November 1 - November 30, 2024 — ​ ​ — ​ — ​ ​ 55,152,099 December 1 - December 31, 2024 — ​ ​ — ​ — ​ ​ 55,152,099 Total ​ — ​ $ — ​ — ​ ​ ​ (1) On January 25, 2024, we announced that our board of directors authorized a new stock repurchase program through January 2025, pursuant to which we are authorized to repurchase, in the aggregate, up to $75.0 million of our outstanding common stock, inclusive of repurchases to offset dilution related to grants of stock-based compensation.
See Item 1A, “Risk Factors — Risks Related to our Common Stock — There can be no assurance that we will continue to declare cash dividends or repurchase stock.” ​ Securities Authorized for Issuance under Equity Compensation Plans ​ The following table sets forth information at December 31, 2023 with respect to compensation plans under which shares of our common stock may be issued.
See Item 1A, “Risk Factors — Risks Related to our Common Stock — There can be no assurance that we will continue to declare cash dividends or repurchase stock.” ​ Securities Authorized for Issuance under Equity Compensation Plans ​ The following table sets forth information at December 31, 2024 with respect to compensation plans under which shares of our common stock may be issued.
In January 2024, our board of directors authorized a new stock repurchase program through January 2025, pursuant to which we are authorized to repurchase, in the aggregate, up to $75.0 million of our outstanding common stock, inclusive of repurchases to offset dilution related to grants of stock-based compensation.
In January 2025, our board of directors authorized a new stock repurchase program through January 2026, pursuant to which we are authorized to repurchase, in the aggregate, up to $100.0 million of our outstanding common stock, inclusive of repurchases to offset dilution related to grants of stock-based compensation.
With the adoption of the new stock repurchase plan in January 2024, the stock repurchase plan authorized in January 2023 expired. ​ Item 6. [Reserved]. ​
With the adoption of the new stock repurchase plan in January 2025, the stock repurchase plan authorized in January 2024 expired. ​ Item 6. [Reserved]. ​
During 2023, we declared and paid cash dividends of $0.64 per common share. On January 25, 2024, we announced that our board of directors increased our quarterly dividend to $0.17 per common share. Although we expect to continue to pay dividends, we may elect not to pay dividends.
During 2024, we declared and paid cash dividends of $0.68 per common share. On January 30, 2025, we announced that our board of directors increased our quarterly dividend to $0.18 per common share. Although we expect to continue to pay dividends, we may elect not to pay dividends.
At February 12, 2024, there were 65,153,092 shares of our common stock outstanding with 304 stockholders of record. ​ In October 2016, we announced that our board of directors authorized a dividend program under which we pay quarterly dividends on our common stock, subject to quarterly declarations by our board of directors.
At February 12, 2025, there were 64,864,275 shares of our common stock outstanding with 293 stockholders of record. ​ In October 2016, we announced that our board of directors authorized a dividend program under which we pay quarterly dividends on our common stock, subject to quarterly declarations by our board of directors.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] ​ 56 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 56 Item 7A. Quantitative and Qualitative Disclosures About Market Risk ​ 108 Item 8. Financial Statements and Supplementary Data ​ 112
Biggest changeItem 6. [Reserved] ​ 57 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 57 Item 7A. Quantitative and Qualitative Disclosures About Market Risk ​ 109 Item 8. Financial Statements and Supplementary Data ​ 113

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSubstantially all of the activity shown below occurred within the banking segment. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Loans Held for Investment ​ 2023 2022 2021 Balance, beginning of year ​ $ 95,442 ​ $ 91,352 ​ $ 149,044 ​ Provision for (reversal of) credit losses ​ 18,392 ​ 8,309 ​ (58,213) ​ Recoveries of loans previously charged off: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ Non-owner occupied ​ ​ 42 ​ ​ 28 ​ ​ 16 ​ Owner occupied ​ ​ 41 ​ ​ 100 ​ ​ 250 ​ Commercial and industrial ​ 3,445 ​ 2,746 ​ 2,656 ​ Construction and land development ​ — ​ — ​ — ​ 1-4 family residential ​ 135 ​ 133 ​ 546 ​ Consumer ​ ​ 276 ​ 289 ​ ​ 281 ​ Broker-dealer ​ ​ — ​ — ​ ​ — ​ Total recoveries ​ 3,939 ​ 3,296 ​ 3,749 ​ Loans charged off: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ Non-owner occupied ​ ​ 34 ​ ​ — ​ ​ — ​ Owner occupied ​ ​ 977 ​ ​ — ​ ​ 310 ​ Commercial and industrial ​ 4,888 ​ 6,945 ​ 2,249 ​ Construction and land development ​ 1 ​ — ​ — ​ 1-4 family residential ​ 73 ​ 138 ​ 312 ​ Consumer ​ ​ 387 ​ 432 ​ ​ 357 ​ Broker-dealer ​ ​ — ​ — ​ ​ — ​ Total charge-offs ​ 6,360 ​ 7,515 ​ 3,228 ​ Net recoveries (charge-offs) ​ (2,421) ​ (4,219) ​ 521 ​ Balance, end of year ​ $ 111,413 ​ $ 95,442 ​ $ 91,352 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average total loans for the year ​ $ 7,950,878 ​ $ 7,840,848 ​ $ 7,645,292 ​ Total loans held for investment (end of year) ​ $ 8,079,745 ​ $ 8,092,673 ​ $ 7,879,904 ​ Ratios: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net recoveries (charge-offs) to average total loans held for investment (1) ​ ​ (0.03) % ​ (0.05) % ​ 0.01 % Non-accrual loans to total loans held for investment (end of year) ​ ​ 0.80 % ​ 0.30 % ​ 0.60 % Allowance for credit losses on loans held for investment to: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total loans held for investment (end of year) ​ ​ 1.38 % ​ 1.18 % ​ 1.16 % Non-accrual loans held for investment (end of year) ​ ​ 173.17 % ​ 386.81 % ​ 193.08 % (1) Net recoveries (charge-offs) to average total loans held for investment ratio presented on a consolidated basis for all periods given relative immateriality of resulting measure by loan portfolio segment. ​ Total non-accrual loans increased by $38.8 million from December 31, 2022 to December 31, 2023, compared to a decrease of $20.7 million from December 31, 2021 to December 31, 2022.
Biggest changeSubstantially all of the activity shown below occurred within the banking segment. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2024 2023 2022 Loans Held for Investment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, beginning of year ​ $ 111,413 ​ $ 95,442 ​ $ 91,352 ​ Provision for credit losses ​ 941 ​ 18,392 ​ 8,309 ​ Recoveries of loans previously charged off: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ Non-owner occupied ​ ​ — ​ ​ 42 ​ ​ 28 ​ Owner occupied ​ ​ 149 ​ ​ 41 ​ ​ 100 ​ Commercial and industrial ​ 2,028 ​ 3,445 ​ 2,746 ​ Construction and land development ​ 2 ​ — ​ — ​ 1-4 family residential ​ 170 ​ 135 ​ 133 ​ Consumer ​ ​ 211 ​ 276 ​ ​ 289 ​ Broker-dealer ​ ​ — ​ — ​ ​ — ​ Total recoveries ​ 2,560 ​ 3,939 ​ 3,296 ​ Loans charged off: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial real estate: ​ ​ ​ ​ ​ ​ ​ Non-owner occupied ​ ​ 1,647 ​ ​ 34 ​ ​ — ​ Owner occupied ​ ​ — ​ ​ 977 ​ ​ — ​ Commercial and industrial ​ 11,865 ​ 4,888 ​ 6,945 ​ Construction and land development ​ — ​ 1 ​ — ​ 1-4 family residential ​ 2 ​ 73 ​ 138 ​ Consumer ​ ​ 284 ​ 387 ​ ​ 432 ​ Broker-dealer ​ ​ — ​ — ​ ​ — ​ Total charge-offs ​ 13,798 ​ 6,360 ​ 7,515 ​ Net charge-offs ​ (11,238) ​ (2,421) ​ (4,219) ​ Balance, end of year ​ $ 101,116 ​ $ 111,413 ​ $ 95,442 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average loans held for investment for the year ​ $ 7,921,528 ​ $ 7,950,878 ​ $ 7,840,848 ​ Total loans held for investment (end of year) ​ $ 7,950,551 ​ $ 8,079,745 ​ $ 8,092,673 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans Held for Sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average loans held for sale for the year ​ $ 934,983 ​ $ 944,470 ​ $ 1,221,235 ​ Total loans held for sale (end of year) ​ $ 858,665 ​ $ 943,846 ​ $ 982,616 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selected Credit Metrics: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net charge-offs to average total loans held for investment (1) ​ ​ (0.14) % ​ (0.03) % ​ (0.05) % Non-accrual loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans held for investment (end of year) ​ $ 84,418 ​ $ 64,337 ​ $ 24,674 ​ Loans held for sale (end of year) ​ $ 3,731 ​ $ 3,990 ​ $ 4,843 ​ Non-accrual loans to total loans (end of year) ​ ​ 1.00 % ​ 0.76 % ​ 0.58 % Allowance for credit losses on loans held for investment to: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total loans (end of year) ​ ​ 1.15 % ​ 1.23 % ​ 1.05 % Total loans held for investment (end of year) ​ ​ 1.27 % ​ 1.38 % ​ 1.18 % Total non-accrual loans (end of year) ​ ​ 114.71 % ​ 163.06 % ​ 323.35 % Non-accrual loans held for investment (end of year) ​ ​ 119.78 % ​ 173.17 % ​ 386.81 % (1) Net charge-offs to average total loans held for investment ratio presented on a consolidated basis for all periods.
We consider net interest margin as a key indicator of profitability, as it represents interest earned on interest-earning assets compared to interest incurred. (4) Net recoveries (charge-offs) to average loans outstanding is defined as the greater of recoveries or charge-offs during the reported period minus charge-offs or recoveries divided by average loans outstanding.
We consider net interest margin as a key indicator of profitability, as it represents interest earned on interest-earning assets compared to interest incurred. (4) Net charge-offs to average loans outstanding is defined as the greater of recoveries or charge-offs during the reported period minus charge-offs or recoveries divided by average loans outstanding.
Our consolidated net interest margin includes certain items that are not reflected in the calculation of our net interest margin within our banking segment and reduce our consolidated net interest margin, such as the borrowing costs of Hilltop and the yields and costs associated with certain items within interest-earning assets and interest-bearing liabilities, such as securities borrowed in the broker-dealer segment and securities loaned in the broker-dealer segment, including items related to securities financing operations that particularly decrease net interest margin.
Our consolidated net interest margin includes certain items that are not reflected in the calculation of our net interest margin within our banking segment and reduce our consolidated net interest margin, such as the borrowing costs of Hilltop and the yields and costs associated with certain items within interest-earning assets and interest-bearing liabilities, such as securities borrowed in the broker-dealer segment and securities loaned in the broker-dealer segment, including items related to securities financing operations that particularly decrease net interest margin.
An increase in mortgage interest rates tends to result in decreased loan origination volume from refinancings, while a decrease in mortgage interest rates tends to result in increased loan origination volume from refinancings.
A decrease in mortgage interest rates tends to result in increased loan origination volume from refinancings, while an increase in mortgage interest rates tends to result in decreased loan origination volume from refinancings.
The Federal Reserve increased its federal funds rate target from 4.00% to 4.25% in January 2023 to 5.25% to 5.50% in August 2023 and held rates steady through December 2023.
The Federal Reserve increased its federal funds rate target from 4.00% - 4.25% in January 2023 to 5.25% - 5.50% in August 2023 and held rates steady through December 2023.
Inflation rates initially expected to be transitory proved to trend persistently higher as the consumer price index rose to 9.1% on an annual basis in June. In response, the Federal Reserve adjusted monetary policy by increasing its federal funds rate target from 0.0% to 0.25% in March 2022 to 4.25% to 4.50% by December 2022.
Inflation rates initially expected to be transitory proved to trend persistently higher as the consumer price index rose to 9.1% on an annual basis in June. In response, the Federal Reserve adjusted monetary policy by increasing its federal funds rate target from 0.0% - 0.25% in March 2022 to 4.25% - 4.50% by December 2022.
Furthermore, a prolonged period of inflation could cause our costs, including compensation, occupancy and software costs, to increase, which could adversely affect our results of operations and financial condition. ​ While interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate.
Furthermore, a prolonged period of inflation has, and could cause our costs, including compensation, occupancy and software costs, to increase, which could adversely affect our results of operations and financial condition. ​ While interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate.
Labor market conditions eased modestly but remained historically tight as the unemployment rate increased from 3.4% to 3.7% during the year. ​ During 2022, our economic outlook was updated to reflect our expectations of a period of below trend economic growth beginning this year and a mild U.S. recession in 2023.
Labor market conditions eased modestly but remained historically tight as the unemployment rate increased from 3.4% to 3.7% during the year. ​ During 2022, our economic outlook was updated to reflect our expectations of a period of below trend economic growth beginning in 2022 and a mild U.S. recession in 2023.
We continue to monitor developments regarding overall economic conditions, market capitalization, and any other triggering events or circumstances that may indicate an impairment in the future. ​ To the extent future operating performance of our reporting segments remain challenged and below forecasted projections during 2024, significant assumptions such as expected future cash flows or the risk-adjusted discount rate used to estimate fair value are adversely impacted, or upon the occurrence of what management would deem to be a triggering event that could, under certain circumstances, cause us to perform impairment tests on our goodwill and other intangible assets, an impairment charge may be recorded for that period.
We continue to monitor developments regarding overall economic conditions, market capitalization, and any other triggering events or circumstances that may indicate an impairment in the future. ​ To the extent future operating performance of our reporting segments remain challenged and below forecasted projections during 2025, significant assumptions such as expected future cash flows or the risk-adjusted discount rate used to estimate fair value are adversely impacted, or upon the occurrence of what management would deem to be a triggering event that could, under certain circumstances, cause us to perform impairment tests on our goodwill and other intangible assets, an impairment charge may be recorded for that period.
Our capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. ​ In order to avoid limitations on capital distributions, including dividend payments, stock repurchases and certain discretionary bonus payments to executive officers, Basel III requires banking organizations to maintain a capital conservation buffer above minimum risk-based capital requirements measured relative to risk-weighted assets. ​ The following table shows PlainsCapital’s and Hilltop’s actual capital amounts and ratios in accordance with Basel III compared to the regulatory minimum capital requirements including conservation buffer ratio in effect at December 31, 2023 (dollars in thousands).
Our capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. ​ In order to avoid limitations on capital distributions, including dividend payments, stock repurchases and certain discretionary bonus payments to executive officers, Basel III requires banking organizations to maintain a capital conservation buffer above minimum risk-based capital requirements measured relative to risk-weighted assets. ​ The following table shows PlainsCapital’s and Hilltop’s actual capital amounts and ratios in accordance with Basel III compared to the regulatory minimum capital requirements including conservation buffer ratio in effect at December 31, 2024 (dollars in thousands).
Under accounting principles generally accepted in the United States (“GAAP”), the business units are comprised of three reportable business segments organized primarily by the core products offered to the segments’ respective customers: banking, broker-dealer and mortgage origination.
Under accounting principles generally accepted in the United States (“GAAP”), the Company’s units are comprised of three reportable business segments organized primarily by the core products offered to the segments’ respective customers: banking, broker-dealer and mortgage origination.
Specifically, during 2023, the banking segment’s provision for credit losses reflected a build in the allowance related to loan portfolio changes since December 31, 2022 and a deteriorating outlook for commercial real estate markets.
During 2023, the banking segment’s provision for credit losses reflected a build in the allowance related to loan portfolio changes since December 31, 2022 and a deteriorating outlook for commercial real estate markets.
Concurrent with the consummation of the PlainsCapital Merger, Hilltop became a financial holding company registered under the Bank Holding Company Act of 1956. ​ On September 13, 2013 (the “Bank Closing Date”), the Bank assumed substantially all of the liabilities, including all of the deposits, and acquired substantially all of the assets of Edinburg, Texas-based FNB from the FDIC, as receiver, and reopened former branches of FNB acquired from the FDIC under the “PlainsCapital Bank” name (the “FNB Transaction”). ​ On January 1, 2015, we acquired SWS in a stock and cash transaction (the “SWS Merger”), whereby SWS’s broker-dealer subsidiaries became subsidiaries of Securities Holdings and SWS’s banking subsidiary, Southwest Securities, FSB, was merged into the Bank.
Concurrent with the consummation of the PlainsCapital Merger, Hilltop became a financial holding company registered under the Bank Holding Company Act of 1956. ​ On September 13, 2013, the Bank assumed substantially all of the liabilities, including all of the deposits, and acquired substantially all of the assets of Edinburg, Texas-based FNB from the FDIC, as receiver, and reopened former branches of FNB acquired from the FDIC under the “PlainsCapital Bank” name (the “FNB Transaction”). ​ On January 1, 2015, we acquired SWS in a stock and cash transaction (the “SWS Merger”), whereby SWS’s broker-dealer subsidiaries became subsidiaries of Securities Holdings and SWS’s banking subsidiary, Southwest Securities, FSB, was merged into the Bank.
During 2023, 2022 and 2021, we incurred interest expense of $12.4 million, $12.3 million and $12.3 million, respectively, on our $50 million aggregate principal amount of 5.75% fixed-to-floating rate subordinated notes due May 15, 2030 (“2030 Subordinated Notes”) and on our $150 million aggregate principal amount of 6.125% fixed-to-floating subordinated notes due May 15, 2035 (“2035 Subordinated Notes,” the 2030 Subordinated Notes and the 2035 Subordinated Notes, collectively, the “Subordinated Notes”), which were issued in May 2020.
During 2024, 2023 and 2022, we incurred interest expense of $12.4 million, $12.4 million and $12.3 million, respectively, on our $50 million aggregate principal amount of 5.75% fixed-to-floating rate subordinated notes due May 15, 2030 (“2030 Subordinated Notes”) and on our $150 million aggregate principal amount of 6.125% fixed-to-floating subordinated notes due May 15, 2035 (“2035 Subordinated Notes,” the 2030 Subordinated Notes and the 2035 Subordinated Notes, collectively, the “Subordinated Notes”), which were issued in May 2020.
While changes in the U.S. economic outlook have been reflected in our current allowance at December 31, 2023, uncertainties that include, among others, the uncertain timing, duration and significance of further increases in market interest rates and a worsening macroeconomic forecast could adversely impact borrower cash flows and result in further increases in the allowance during future periods.
While changes in the U.S. economic outlook have been reflected in our current allowance at December 31, 2024, uncertainties that include, among others, the uncertain timing, duration and significance of further increases in market interest rates and a worsening macroeconomic forecast could adversely impact borrower cash flows and result in further increases in the allowance during future periods.
In addition, PrimeLending has an available line of credit with an unaffiliated bank of up to $1.0 million, of which no borrowings were drawn at December 31, 2023. ​ PrimeLending owns a 100% membership interest in PrimeLending Ventures Management, LLC (“Ventures Management”) which holds a controlling ownership interest in and is the managing member of certain ABAs.
In addition, PrimeLending has an available line of credit with an unaffiliated bank of up to $1.0 million, of which no borrowings were drawn at December 31, 2024. ​ PrimeLending owns a 100% membership interest in PrimeLending Ventures Management, LLC (“Ventures Management”) which holds a controlling ownership interest in and is the managing member of certain ABAs.
While immediate financial institution safety and soundness concerns have somewhat subsided, these failures underscore the importance of maintaining access to diverse sources of funding. ​ In light of the above events, we have continued our efforts to monitor deposit flows and balance sheet trends to ensure that our liquidity needs and financial flexibility are maintained.
While financial institution safety and soundness concerns have subsided, these failures underscore the importance of maintaining access to diverse sources of funding. ​ In light of the above events, we have continued our efforts to monitor deposit flows and balance sheet trends to ensure that our liquidity needs and financial flexibility are maintained.
(4) Annualized taxable equivalent. ​ With regard to net interest income, as of December 31, 2023, the banking segment maintained an asset sensitive rate risk position, meaning the amount of its interest-earning assets maturing or repricing within a given period exceeds the amount of its interest-bearing liabilities also maturing or repricing within that time period.
(4) Annualized taxable equivalent. ​ With regard to net interest income, as of December 31, 2024, the banking segment maintained an asset sensitive rate risk position, meaning the amount of its interest-earning assets maturing or repricing within a given period exceeds the amount of its interest-bearing liabilities also maturing or repricing within that time period.
The notional amounts of these forward commitments at December 31, 2023, 2022 and 2021 were $1.0 billion, $1.2 billion and $2.4 billion, respectively, while the related estimated fair values were ($10.2) million, $3.3 million and $0.4 million, respectively. ​ Allowance for Credit Losses on Loans ​ For additional information regarding the allowance for credit losses, refer to the section captioned “Critical Accounting Estimates” included in this Form 10-K. ​ Loans Held for Investment ​ The Bank has lending policies in place with the goal of establishing an asset portfolio that will provide a return on stockholders’ equity sufficient to maintain capital to assets ratios that meet or exceed established regulations.
The notional amounts of these forward commitments at December 31, 2024, 2023 and 2022 were $932.6 million, $1.0 billion and $1.2 billion, respectively, while the related estimated fair values were $6.4 million, ($10.2) million and $3.3 million, respectively. ​ Allowance for Credit Losses on Loans ​ For additional information regarding the allowance for credit losses, refer to the section captioned “Critical Accounting Estimates” included in this Form 10-K. ​ Loans Held for Investment ​ The Bank has lending policies in place with the goal of establishing an asset portfolio that will provide a return on stockholders’ equity sufficient to maintain capital to assets ratios that meet or exceed established regulations.
The banking segment’s loan concentrations were within regulatory guidelines at December 31, 2023. ​ In addition, the Bank’s loan portfolio includes collateralized loans extended to businesses that depend on the energy industry, including those within the exploration and production, field services, pipeline construction and transportation sectors.
The banking segment’s loan concentrations were within regulatory guidelines at December 31, 2024. ​ In addition, the Bank’s loan portfolio includes collateralized loans extended to businesses that depend on the energy industry, including those within the exploration and production, field services, pipeline construction and transportation sectors.
At December 31, 2023, Hilltop Securities had credit arrangements with two unaffiliated banks, with maximum aggregate commitments of up to $425.0 million. These credit arrangements are used to finance securities owned, securities held for correspondent accounts, receivables in customer margin accounts and underwriting activities.
At December 31, 2024, Hilltop Securities had credit arrangements with two unaffiliated banks, with maximum aggregate commitments of up to $425.0 million. These credit arrangements are used to finance securities owned, securities held for correspondent accounts, receivables in customer margin accounts and underwriting activities.
The commercial paper notes (“CP Notes”) may be issued with maturities of 14 days to 270 days from the date of issuance. The CP Notes are issued under two separate programs, Series 2019-1 CP Notes and Series 2019-2 CP Notes, in maximum aggregate amounts of $300 million and $200 million, respectively.
The commercial paper notes (“CP Notes”) may be issued with maturities of 14 days to 270 days from the date of issuance. The CP Notes were issued under two separate programs, Series 2019-1 CP Notes and Series 2019-2 CP Notes, in maximum aggregate amounts of $300 million and $200 million, respectively.
During 2023, Hilltop paid $5.1 million to 99 Table of Contents repurchase an aggregate of 164,604 shares of our common stock at an average price of $30.95 per share pursuant to the stock repurchase program. ​ In January 2024, our board of directors authorized a new stock repurchase program through January 2025, pursuant to which we are authorized to repurchase, in the aggregate, up to $75.0 million of our outstanding common stock, inclusive of repurchases to offset dilution related to grants of stock-based compensation.
During 2023, Hilltop paid $5.1 million to repurchase an aggregate of 164,604 shares of our common stock at an average price of $30.95 per share pursuant to the stock repurchase program. ​ In January 2024, our board of directors authorized a new stock repurchase program through January 2025, pursuant to which we are authorized to repurchase, in the aggregate, up to $75.0 million of our outstanding common stock, inclusive of repurchases to offset dilution related to grants of stock-based compensation.
The banking segment does not generally participate in syndicated loan transactions and has no foreign loans in its portfolio. ​ A significant portion of the banking segment’s loan portfolio at December 31, 2023 consisted of commercial real estate loans secured by properties.
The banking segment does not generally participate in syndicated loan transactions and has no foreign loans in its portfolio. ​ A significant portion of the banking segment’s loan portfolio at December 31, 2024 consisted of commercial real estate loans secured by properties.
Risk Factors” for additional discussion of the potential adverse impacts of unpredictable economic, market and business conditions on our business, results of operations and financial condition. ​ Factors Affecting Results of Operations ​ As a financial institution providing products and services through our banking, broker-dealer and mortgage origination segments, we are directly affected by general economic and market conditions, many of which are beyond our control and unpredictable.
Risk Factors” for additional discussion of the potential adverse impacts of unpredictable economic, market and business conditions on our business, results of operations and financial condition. ​ 61 Table of Contents Factors Affecting Results of Operations ​ As a financial institution providing products and services through our banking, broker-dealer and mortgage origination segments, we are directly affected by general economic and market conditions, many of which are beyond our control and unpredictable.
The change in the allowance for credit losses during 2023 was primarily attributable to the Bank and also reflected other factors including, but not limited to, loan mix, and changes in loan balances and qualitative factors from the prior period.
The change in the allowance for credit losses during 2024 was primarily attributable to the Bank and also reflected other factors including, but not limited to, loan mix, and changes in loan balances and qualitative factors from the prior period.
(2) Presented on a taxable equivalent basis with taxable equivalent adjustments based on the applicable corporate federal income tax rate of 21% for the periods presented. The adjustment to interest income was $2.7 million, $1.6 million and $1.7 million during 2023, 2022 and 2021, respectively. ​ The banking segment’s net interest margin exceeds our consolidated net interest margin shown above.
(2) Presented on a taxable equivalent basis with taxable equivalent adjustments based on the applicable corporate federal income tax rate of 21% for the periods presented. The adjustment to interest income was $2.5 million, $2.7 million and $1.6 million during 2024, 2023 and 2022, respectively. ​ The banking segment’s net interest margin exceeds our consolidated net interest margin shown above.
The loss of one or more of our largest Bank customers, or a significant decline in our deposit balances due to ordinary course fluctuations related to these customers’ businesses, could adversely affect our liquidity and might require us to raise deposit rates to attract new deposits, purchase federal funds or borrow funds on a short-term basis to replace such deposits. ​ Broker-Dealer Segment ​ The Hilltop Broker-Dealers rely on their equity capital, short-term bank borrowings, interest-bearing and noninterest-bearing client credit balances, correspondent deposits, securities lending arrangements, repurchase agreement financing, commercial paper issuances and other payables to finance their assets and operations, subject to their respective compliance with broker-dealer net capital and customer protection rules.
The loss of one or more of our largest Bank customers, or a significant decline in our deposit balances due to ordinary course fluctuations related to these customers’ businesses, could adversely affect our liquidity and might require us to raise deposit rates to attract new deposits, purchase federal funds or borrow funds on a short-term basis to replace such deposits. 104 Table of Contents ​ Broker-Dealer Segment ​ The Hilltop Broker-Dealers finance their assets and operations primarily from their equity capital, short-term bank borrowings, interest-bearing and noninterest-bearing client credit balances, correspondent deposits, securities lending arrangements, repurchase agreement financing, commercial paper issuances and other payables, subject to their respective compliance with broker-dealer net capital and customer protection rules.
(2) Presented on a taxable equivalent basis with taxable equivalent adjustments based on the applicable corporate federal income tax rates of 21% for all periods presented. The adjustment to interest income was $0.7 million, $0.8 million and $0.8 million during 2023, 2022 and 2021, respectively. ​ The banking segment’s net interest margin exceeds our consolidated net interest margin.
(2) Presented on a taxable equivalent basis with taxable equivalent adjustments based on the applicable corporate federal income tax rates of 21% for all periods presented. The adjustment to interest income was $0.6 million, $0.7 million and $0.8 million during 2024, 2023 and 2022, respectively. ​ The banking segment’s net interest margin exceeds our consolidated net interest margin.
At December 31, 2023, Hilltop Securities had no borrowings under its credit arrangements or its credit facilities. ​ Hilltop Securities uses the net proceeds (after deducting related issuance expenses) from the sale of two commercial paper programs for general corporate purposes, including working capital and the funding of a portion of its securities inventories.
At December 31, 2024, Hilltop Securities had no outstanding borrowings under its credit arrangements or its credit facilities. ​ Hilltop Securities uses the net proceeds (after deducting related issuance expenses) from the sale of two commercial paper programs for general corporate purposes, including working capital and the funding of a portion of its securities inventories.
These activities include holding company financing and investing activities, merchant banking investment opportunities, and management and administrative services to support the overall operations of the Company. ​ 62 Table of Contents The eliminations of intercompany transactions are included in “All Other and Eliminations.” Additional information concerning our reportable business segments is presented in Note 27, Segment and Related Information, in the notes to our consolidated financial statements. ​ The following table presents certain information about the continuing operating results of our reportable business segments (in thousands).
These activities include holding company financing and investing activities, merchant banking investment opportunities, and management and administrative services to support the overall operations of the Company. ​ The eliminations of intercompany transactions are included in “All Other and Eliminations.” Additional information concerning our reportable business segments is presented in Note 27, “Segment and Related Information,” in the notes to our consolidated financial statements. ​ The following table presents certain information about the continuing operating results of our reportable business segments (in thousands).
Hilltop Securities, Momentum Independent Network and Hilltop Securities Asset Management, LLC are registered investment advisers under the Investment Advisers Act of 1940. ​ The mortgage origination segment includes the operations of PrimeLending, which offers a variety of loan products and generates revenue predominantly from fees charged on the origination and servicing of loans and from selling these loans in the secondary market. ​ Corporate includes certain activities not allocated to specific business segments.
Hilltop Securities, Momentum Independent Network and Hilltop Securities Asset Management, LLC are investment advisers registered with the SEC under the Investment Advisers Act of 1940, as amended. ​ The mortgage origination segment includes the operations of PrimeLending, which offers a variety of loan products and generates revenue predominantly from fees charged on the origination and servicing of loans and from selling these loans in the secondary market. ​ Corporate includes certain activities not allocated to specific business segments.
The majority of floating rate loans carry an interest rate tied to a SOFR rate or The Wall Street Journal Prime Rate, as published in The Wall Street Journal. ​ Broker-Dealer Segment ​ The loan portfolio of the broker-dealer segment consists primarily of margin loans to customers and correspondents that are due within one year.
The majority of floating rate loans carry an interest rate tied to a SOFR rate or The Wall Street Journal Prime Rate, as published in The Wall Street Journal. ​ 88 Table of Contents Broker-Dealer Segment ​ The loan portfolio of the broker-dealer segment consists primarily of margin loans to customers and correspondents that are due within one year.
The guidelines for each individual portfolio segment set forth permissible and impermissible loan types. With respect to each loan type, the guidelines within the Bank’s loan policy provide minimum requirements for the underwriting factors listed above. The Bank’s underwriting procedures also include an analysis of any collateral and guarantor.
The guidelines for each individual portfolio segment set forth permissible and impermissible loan types. With respect to each loan type, the guidelines within the Bank’s loan policy provide minimum 89 Table of Contents requirements for the underwriting factors listed above. The Bank’s underwriting procedures also include an analysis of any collateral and guarantor.
None of the available for sale debt securities held were past due at December 31, 2023. In addition, as of December 31, 2023, we had evaluated our held to maturity debt securities, considering the current credit ratings and recognized losses, and determined the potential credit loss to be minimal.
None of the available for sale debt securities held were past due at December 31, 2024. In addition, as of December 31, 2024, we evaluated our held to maturity debt securities, considering the current credit ratings and recognized losses, and determined the potential credit loss to be minimal.
Results of these reviews are presented to management, the Bank’s board of directors and the Risk Committee of the board of directors of the Company. ​ 88 Table of Contents The allowance for credit losses for loans held for investment represents management’s best estimate of all expected credit losses over the expected contractual life of our existing portfolio.
Results of these reviews are presented to management, the Bank’s board of directors and the Risk Committee of the board of directors of the Company. ​ The allowance for credit losses for loans held for investment represents management’s best estimate of all expected credit losses over the expected contractual life of our existing portfolio.
At December 31, 2022, non-accrual loans included 40 commercial and industrial relationships with loans secured by accounts receivable, automobiles, equipment and notes receivable. Non-accrual loans at December 31, 2022 also included $4.8 million of loans secured by residential real estate which were classified as loans held for sale.
Non-accrual loans at December 31, 2023 also included $4.0 million of loans secured by residential real estate which were classified as loans held for sale. At December 31, 2022, non-accrual loans included 40 commercial and industrial relationships with loans secured by accounts receivable, automobiles, equipment and notes receivable.
Historically, variable compensation comprises the majority of total employees’ compensation and benefits expenses, but during 2023, as opposed to 2022 and 2021, non-variable compensation was greater than variable compensation.
Historically, variable compensation comprises the majority of total employees’ compensation and benefits expenses, but during 2023, as opposed to 2024 and 2022, non-variable compensation was greater than variable compensation.
In determining the allowance for credit losses, we derive an estimated credit loss assumption from a model that categorizes loan pools based on loan type and internal risk rating or delinquency bucket. ​ When a loan moves to a substandard non-accrual or worse risk rating grade, it is removed from the collective evaluation allowance methodology and is subject to individual evaluation.
In determining the allowance for credit 107 Table of Contents losses, we derive an estimated credit loss assumption from a model that categorizes loan pools based on loan type and internal risk rating or delinquency bucket. ​ When a loan moves to a substandard non-accrual or worse risk rating grade, it is removed from the collective evaluation allowance methodology and is subject to individual evaluation.
During 2022, the banking segment’s provision for credit losses was driven by a deteriorating U.S. economic outlook since December 31, 2021. The change in the allowance during 2022 was also impacted by net charge-offs of $4.2 million.
During 2022, the banking segment’s provision for credit 71 Table of Contents losses was driven by a deteriorating U.S. economic outlook since December 31, 2021. The change in the allowance during 2022 was also impacted by net charge-offs of $4.2 million.
When computing allowance levels, credit loss assumptions are estimated using models that analyze loans according to credit risk ratings, loss history, delinquency status and other credit trends and risk 105 Table of Contents characteristics, including current conditions and reasonable and supportable forecasts about the future. Significant variables that impact the modeled losses across our loan portfolios are the U.S.
When computing allowance levels, credit loss assumptions are estimated using models that analyze loans according to credit risk ratings, loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Significant variables that impact the modeled losses across our loan portfolios are the U.S.
In connection with the BORO Acquisition, we merged BORO into the Bank, and all customer accounts were converted to the PlainsCapital Bank platform. ​ Segment Information ​ We have two primary business units, PCC (banking and mortgage origination) and Securities Holdings (broker-dealer).
In connection with the BORO Acquisition, we merged BORO into the Bank, and all customer accounts were converted to the PlainsCapital Bank platform. ​ Segment Information ​ The Company has two primary business units, PCC (banking and mortgage origination) and Securities Holdings (broker-dealer).
For origination services provided, the mortgage origination segment was reimbursed direct origination costs associated with loans retained by the banking segment, in addition to payment of a correspondent fee. The reimbursed origination costs and correspondent fee are included in the mortgage origination segment operating results, and the correspondent fees are eliminated in consolidation.
For origination services provided, the mortgage origination segment was reimbursed direct origination costs associated with loans retained by the banking segment, in addition to payment of a correspondent fee. The reimbursed origination costs and correspondent fee 79 Table of Contents are included in the mortgage origination segment operating results, and the correspondent fees are eliminated in consolidation.
While the mortgage origination segment sold loans prior to 2014, it does not anticipate experiencing significant losses in the future on loans originated prior to 2014 because of investor claims under these provisions of its sales contracts. ​ When a claim for indemnification of a loan sold is made by an agency, investor, or other party, the mortgage origination segment evaluates the claim and determines if the claim can be satisfied through additional documentation or other deliverables.
While the mortgage origination segment sold loans prior to 2015, it does not anticipate experiencing significant losses in the future on loans originated prior to 2015 as a result of investor claims under these provisions of its sales contracts. ​ When a claim for indemnification of a loan sold is made by an agency, investor, or other party, the mortgage origination segment evaluates the claim and determines if the claim can be satisfied through additional documentation or other deliverables.
This decrease was primarily the result of decreases in the volume of interest rate lock commitments (“IRLCs”), mortgage loan originations and sales and an increase in the net interest expense, partially offset by a decrease in noninterest expense. ​ During 2022 and continuing through the beginning of the fourth quarter of 2023, the U.S. 10-Year Treasury Rate and mortgage interest rates increased significantly.
This decrease was primarily the result of decreases in the volume of IRLCs, mortgage loan originations and sales and an increase in the net interest expense, partially offset by a decrease in noninterest expense. ​ During 2022 and continuing through the beginning of the fourth quarter of 2023, the U.S. 10-Year Treasury Rate and mortgage interest rates increased significantly.
Investment and interest income earned during 2023 was primarily comprised of dividend income from merchant banking investment activities, in addition to interest income earned on intercompany notes. ​ Interest expense during 2023, 2022 and 2021 included recurring annual interest expense of $7.7 million incurred on our $150.0 million aggregate principal amount of 5% senior notes due April 15, 2025 (“Senior Notes”).
Investment and interest income earned during 2024 was primarily comprised of dividend income from merchant banking investment activities, in addition to interest income earned on intercompany notes. ​ Interest expense during 2024, 2023 and 2022 included recurring annual interest expense of $7.7 million incurred on our $150.0 million aggregate principal amount of 5% Senior Notes due April 15, 2025.
The deposit pricing beta represents the change in interest-bearing deposit pricing in response to a change in market interest rates. The historical interest-bearing deposit pricing beta for the Bank, excluding deposits from our Hilltop Securities FDIC-insured sweep program and brokered deposits, has approximated 50 percent .
The deposit pricing beta represents the change in interest-bearing deposit pricing in response to a change in market interest rates. The historical interest-bearing deposit pricing beta for the Bank, excluding deposits from our Hilltop Securities FDIC-insured sweep program and brokered deposits, has approximated 54% .
Given the current market dynamics, including economic uncertainties, the rapid increase in market interest rates since 2022, and a deteriorating outlook for commercial real estate markets, management has heightened its specific review procedures of credits maturing in the next six to twelve months as well as those credits associated with real estate. ​ The banking segment’s total loans held for investment, net of the allowance for credit losses, were $8.5 billion, $8.5 billion and $8.8 billion at December 31, 2023, 2022 and 2021, respectively.
Given the current market dynamics, including economic uncertainties, the heightened level of market interest rates since 2022, and a deteriorating outlook for commercial real estate markets, management has heightened its specific review procedures of credits maturing in the next six to twelve months as well as those credits associated with real estate. ​ The banking segment’s total loans held for investment, net of the allowance for credit losses, were $8.3 billion, $8.5 billion and $8.5 billion at December 31, 2024, 2023 and 2022, respectively.
(a wholly owned subsidiary of Securities Holdings), Hilltop Securities and Momentum Independent Network are collectively referred to as the “Hilltop Broker-Dealers,” references to the “Bank” refer to PlainsCapital Bank (a wholly owned subsidiary of PCC), references to “FNB” refer to First National Bank, references to “SWS” refer to the former SWS Group, Inc., references to “PrimeLending” refer to PrimeLending, a PlainsCapital Company (a wholly owned subsidiary of the Bank) and its subsidiaries as a whole. ​ 56 Table of Contents OVERVIEW ​ We are a financial holding company registered under the Bank Holding Company Act of 1956.
(a wholly owned subsidiary of Securities Holdings, Hilltop Securities and Momentum Independent Network are collectively referred to as the “Hilltop Broker-Dealers”), references to the “Bank” refer to PlainsCapital Bank (a wholly owned subsidiary of PCC), references to “FNB” refer to First National Bank, references to “SWS” refer to the former SWS Group, Inc., references to “PrimeLending” refer to PrimeLending, a PlainsCapital Company (a wholly owned subsidiary of the Bank) and its subsidiaries as a whole. ​ 57 Table of Contents OVERVIEW ​ We are a financial holding company registered under the Bank Holding Company Act of 1956.
We consider total compensation as a percentage of net revenue to be a key performance measure and indicator of segment profitability. (2) Pre-tax margin is defined as income before income taxes divided by net revenue.
We consider total compensation as a percentage of net revenue to be a key performance measure and indicator of segment profitability. 75 Table of Contents (2) Pre-tax margin is defined as income before income taxes divided by net revenue.
The impact of rate movements will change with the shape of the yield curve, including any changes in steepness or flatness and inversions at any points on the yield curve. ​ During 2023, 2022 and 2021, the banking segment retained approximately $140 million, $532 million and $778 million, respectively, in mortgage loans originated by the mortgage origination segment.
The impact of rate movements will change with the shape of the yield curve, including any changes in steepness or flatness and inversions at any points on the yield curve. ​ During 2024, 2023 and 2022, the banking segment retained approximately $124 million, $140 million and $532 million, respectively, in mortgage loans originated by the mortgage origination segment.
An unexpected influx of withdrawals of deposits could adversely impact our ability to rely on organic deposits to primarily fund our operations, potentially requiring greater reliance on secondary sources of liquidity to meet withdrawal deposits or to fund continuing operations.
An unexpected influx of withdrawals of deposits could adversely impact our ability to rely on 60 Table of Contents organic deposits to primarily fund our operations, potentially requiring greater reliance on secondary sources of liquidity to meet withdrawal deposits or to fund continuing operations.
Potential problem loans do not include purchased credit deteriorated (“PCD”) loans because PCD loans exhibited evidence of more than insignificant credit deterioration at acquisition that made it probable that all contractually required principal payments would not be collected. ​ At December 31, 2023, we had $207.4 million in potential problem loans, compared to $186.6 million at December 31, 2022 and $201.6 million at December 31, 2021.
Potential problem loans do not include purchased credit deteriorated (“PCD”) loans because PCD loans exhibited evidence of more than insignificant credit deterioration at acquisition that made it probable that all contractually required principal payments would not be collected. ​ At December 31, 2024, we had $166.9 million in potential problem loans, compared to $207.4 million at December 31, 2023 and $186.6 million at December 31, 2022.
During 2023, 2022 and 2021, the mortgage origination segment retained servicing on approximately 18%, 25% and 29%, respectively, of loans sold. A reduction in third-party mortgage servicers purchasing mortgage servicing rights, even if modest, may result in PrimeLending increasing the rate of retained servicing on mortgage loans sold at any time.
During 2024, 2023 and 2022, the mortgage origination segment retained servicing on approximately 7%, 18% and 25%, respectively, of loans sold. A reduction in third-party mortgage servicers purchasing mortgage servicing rights, even if modest, may result in PrimeLending increasing the rate of retained servicing on mortgage loans sold at any time.
These agencies may also monitor additional financial performance trends at their discretion, including risk-based analyses focused on loans that the mortgage origination segment is currently responsible for representation and warranties that agency loans sold meet certain requirements, including representations as to underwriting standards and the validity of certain borrower representations in connection with the loan.
FNMA and FHLMC may also monitor additional financial performance trends at their discretion, including risk-based analyses focused on loans that the mortgage origination segment is currently responsible for representations and warranties that agency loans sold meet certain requirements, including representations as to underwriting standards and the validity of certain borrower representations in connection with the loan.
Loan origination volume is central to the segment’s ability to generate income by originating and selling mortgage loans, 77 Table of Contents resulting in net gains from the sale of loans, other mortgage production income and other mortgage loan origination fees.
Loan origination volume is central to the segment’s ability to generate income by originating and selling mortgage loans, resulting in net gains from the sale of loans, mortgage loan origination fees, and other mortgage production income.
With respect to these securities, we considered the risk of credit loss to be negligible, and therefore, no allowance was recognized on the debt securities portfolio at December 31, 2023. ​ 84 Table of Contents The following table sets forth the estimated maturities of our debt securities, excluding trading securities, at December 31, 2023.
With respect to these securities, we considered the risk of credit loss to be negligible, and therefore, no allowance was recognized on the debt securities portfolio at December 31, 2024. ​ 85 Table of Contents The following table sets forth the estimated maturities of our debt securities, excluding trading securities, at December 31, 2024.
Currently, the banking segment is facing intense competition for its deposit base as customers seek higher yields on deposits.
Currently, the banking segment is facing continued competition for its deposit base as customers seek higher yields on deposits.
The interest rate for the 2030 Subordinated Notes will reset quarterly beginning May 15, 2025 to an interest rate, per year, equal to the then-current benchmark rate, which is expected to be three-month term SOFR rate, plus 5.68%, payable quarterly in arrears.
The interest rate for the 2030 Subordinated Notes will reset quarterly beginning May 15, 2025 to an interest rate, per year, equal to the then-current benchmark rate, which is expected to be three-month term SOFR rate, 102 Table of Contents plus 5.68%, payable quarterly in arrears.
The change in reportable business segment net interest income during 2023, compared with 2022, primarily reflected decreases within our banking and mortgage origination segments. ​ The other component of our revenue is noninterest income, which is primarily comprised of the following: ​ (i) Income from broker-dealer operations.
The change in reportable business segment net interest income during 2024, compared with 2023, primarily reflected decreases within our banking and broker-dealer segments. ​ The other component of our revenue is noninterest income, which is primarily comprised of the following: ​ (i) Income from broker-dealer operations.
Income before income taxes during 2023, 2022 and 2021 included net accretion on earning assets and liabilities of $8.6 million, $10.8 million and $19.2 million, respectively, and amortization of identifiable intangibles of $2.9 million, $4.5 million and $5.2 million, respectively, related to the Bank Transactions. ​ ​ The information shown in the table below includes certain key performance indicators on a consolidated basis. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2023 ​ 2022 ​ 2021 Return on average stockholders' equity (1) ​ 5.31 % ​ 5.11 % ​ 15.38 % Return on average assets (2) ​ 0.71 % ​ 0.69 % ​ 2.17 % Net interest margin (3) (4) ​ 3.07 % ​ 2.87 % ​ 2.57 % Leverage ratio (5) (end of year) ​ 12.23 % ​ 11.47 % ​ 12.58 % Common equity Tier 1 risk-based capital ratio (6) (end of year) ​ 19.32 % ​ 18.23 % ​ 21.22 % (1) Return on average stockholders’ equity is defined as consolidated income attributable to Hilltop divided by average total Hilltop stockholders’ equity.
Income before income taxes during 2024, 2023 and 2022 included net accretion on earning assets and liabilities of $5.1 million, $8.6 million and $10.8 million, respectively, and amortization of identifiable intangibles of $1.8 million, $2.9 million and $4.5 million, respectively, related to the Bank Transactions. ​ ​ The information shown in the table below includes certain key performance indicators on a consolidated basis. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2024 ​ 2023 ​ 2022 Return on average stockholders' equity (1) ​ 5.29 % ​ 5.31 % ​ 5.11 % Return on average assets (2) ​ 0.78 % ​ 0.71 % ​ 0.69 % Net interest margin (3) (4) ​ 2.81 % ​ 3.07 % ​ 2.87 % Leverage ratio (5) (end of year) ​ 12.57 % ​ 12.23 % ​ 11.47 % Common equity Tier 1 risk-based capital ratio (6) (end of year) ​ 21.23 % ​ 19.32 % ​ 18.23 % (1) Return on average stockholders’ equity is defined as consolidated income attributable to Hilltop divided by average total Hilltop stockholders’ equity.
Additionally, these loans are subject to a number of regulatory requirements as well as the Hilltop Broker-Dealers’ internal policies. The broker-dealer segment’s total loans held for investment, net of the allowance for credit losses, were $344.1 million, $431.0 million and $733.0 million at December 31, 2023, 2022 and 2021, respectively.
Additionally, these loans are subject to a number of regulatory requirements as well as the Hilltop Broker-Dealers’ internal policies. The broker-dealer segment’s total loans held for investment, net of the allowance for credit losses, were $363.7 million, $344.1 million and $431.0 million at December 31, 2024, 2023 and 2022, respectively.
During 2023, we paid $5.1 million to repurchase an aggregate of 164,604 shares of our common stock at an average price of $30.95 per share pursuant to the stock repurchase program.
During 2023, we paid $5.1 million to repurchase an aggregate of 164,604 shares of our common stock at an average price of $30.95 per share.
Although we anticipate a relatively stable percentage of refinancing volume relative to total loan origination volume during 2024 as compared to 2023, a higher refinance percentage could be driven by a slowing of purchase volume due to the negative impact on new and existing home sales resulting from existing home inventory shortages and affordability challenges related to new home construction, and/or an increase in all-cash buyers. ​ The mortgage origination segment primarily originates its mortgage loans through a retail channel, with limited lending through its affiliated business arrangements (“ABAs”).
Although we anticipate a slightly higher percentage of refinancing volume relative to total loan origination volume during 2025, as compared to 2024, an even higher refinance percentage could be driven by a slowing of purchase volume due to the negative impact on new and existing home sales resulting from existing home inventory shortages and affordability challenges related to new home construction, and/or an increase in all-cash buyers. ​ The mortgage origination segment primarily originates its mortgage loans through a retail channel, with additional lending through its affiliated business arrangements (“ABAs”).
Fluctuations in interest rates, as well as the amounts and types of interest-earning assets and interest-bearing liabilities we hold, affect net interest income. We generated $466.8 million in net interest income during 2023, compared with net interest income of $459.0 million and $423.0 million during 2022 and 2021, respectively.
Fluctuations in interest rates, as well as the amounts and types of interest-earning assets and interest-bearing liabilities we hold, affect net interest income. We generated $417.8 million in net interest income during 2024, compared with net interest income of $466.8 million and $459.0 million during 2023 and 2022, respectively.
(4) The securities financing operations within our broker-dealer segment had the effect of lowering both net interest margin and taxable equivalent net interest margin by 26 basis points, 21 basis points and 16 basis points during 2023, 2022 and 2021, respectively.
(4) The securities financing operations within our broker-dealer segment had the effect of lowering both net interest margin and taxable equivalent net interest margin by 24 basis points, 26 basis points and 21 basis points during 2024, 2023 and 2022, respectively.
To determine the allowance for credit losses as of December 31, 2023, we utilized a single macroeconomic alternative scenario, or S7, published by Moody’s Analytics in December 2023. The alternative scenario utilizes multiple economic variables in forecasting the economic outlook.
To determine the allowance for credit losses as of December 31, 2024, we utilized a single macroeconomic alternative scenario, or S5, published by Moody’s Analytics in December 2024. The alternative scenario utilizes multiple economic variables in forecasting the economic outlook.
Global supply chains eased throughout 2023 and adjusted to the longer than expected Russia-Ukraine conflict; however, conflicts in the Middle East between Israel and Hamas and the U.S. and Yemen added new uncertainties.
Global supply chains eased throughout 2023 and adjusted to the longer than expected Russia-Ukraine conflict; however, conflicts in the Middle East between Israel and Hamas and the U.S. and 91 Table of Contents Yemen added new uncertainties.
(2) Changes in the yields earned on loans held for investment, gross included a decline during 2023 of $1.9 million in accretion of discount on loans, compared with 2022, and a decrease of $8.3 million during 2022, compared with 2021.
(2) Changes in the yields earned on loans held for investment, gross included a decline during 2024 of $3.6 million in accretion of discount on loans, compared with 2023, and a decrease of $1.9 million during 2023, compared with 2022.
Our corporate treasury group is responsible for continuously monitoring our liquidity position to ensure that our assets and liabilities are managed in a manner that will meet our short-term and long-term cash requirements.
Our corporate treasury group is responsible for continuously 103 Table of Contents monitoring our liquidity position to ensure that our assets and liabilities are managed in a manner that will meet our short-term and long-term cash requirements.
Net revenue provides for some level of comparability of trends across the financial services industry as it reflects both noninterest income, including investment and securities advisory fees and commissions, as well as net interest income. Internally, we assess the broker-dealer segment’s performance on a revenue basis for comparability with our banking segment. (3) Variable compensation represents performance-based commissions and incentives.
Net revenue provides for some level of comparability of trends across the financial services industry as it reflects both noninterest income, including investment and securities advisory fees and commissions, as well as net interest income. Internally, we assess the broker-dealer segment’s performance on a net revenue basis for comparability with our banking segment.
Loan volumes to be originated on behalf of and retained by the banking segment are evaluated each quarter. Loans sold to and retained by the banking segment during 2023, 2022 and 2021 were $140 million, $532 million and $778 million, respectively.
Loan volumes to be originated on behalf of and retained by the banking segment are evaluated each quarter. Loans sold to and retained by the banking segment during 2024, 2023 and 2022 were $124 million, $140 million and $532 million, respectively.
The Hilltop Broker-Dealers are required to carry their securities at fair value and record changes in the fair value of the portfolio to the statements of operations. Accordingly, the securities portfolio of the Hilltop Broker-Dealers included trading securities of $515.9 million at December 31, 2023.
The Hilltop Broker-Dealers are required to carry their securities at fair value and record changes in the fair value of the portfolio to the statements of operations. Accordingly, the securities portfolio of the Hilltop Broker-Dealers included trading securities of $515.2 million at December 31, 2024.
The critical accounting estimates, as summarized below, which we believe to be the most critical in preparing our consolidated financial statements relate to allowance for credit losses, mortgage servicing rights asset, goodwill and identifiable intangible assets and mortgage loan indemnification liability. ​ Allowance for Credit Losses ​ The allowance for credit losses for loans represents management’s estimate of all expected credit losses over the expected contractual life of our existing loan portfolio.
The critical accounting estimates, as summarized below, which we believe to be the most critical in preparing our consolidated financial statements relate to allowance for credit losses and goodwill and identifiable intangible assets. ​ Allowance for Credit Losses ​ The allowance for credit losses for loans represents management’s estimate of all expected credit losses over the expected contractual life of our existing loan portfolio.
These shares were returned to the pool of authorized but unissued shares of common stock. ​ Reconciliation and Management’s Explanation of Non-GAAP Financial Measures ​ We present certain measures in our selected financial data that are not measures of financial performance recognized by GAAP.
These shares were repurchased under previous stock repurchase programs and returned to the pool of authorized but unissued shares of common stock. ​ Reconciliation and Management’s Explanation of Non-GAAP Financial Measures ​ We present certain measures in our selected financial data that are not measures of financial performance recognized by GAAP.
The broker-dealer segment generates a majority of its revenues from fees and commissions earned from investment advisory and securities brokerage services. Hilltop Securities is a broker-dealer registered with the SEC and the Financial Industry Regulatory Authority (“FINRA”) and a member of the New York Stock Exchange (“NYSE”).
The broker-dealer segment generates a majority of its revenues from fees and commissions earned from investment advisory and securities brokerage services. Hilltop Securities is a broker-dealer registered with the Securities and Exchange Commission (the “SEC”) and the Financial Industry Regulatory Authority, Inc. (“FINRA”) and a member of the New York Stock Exchange.
These merchant banking activities currently include investments within various industries, including power generation, consumer services, youth sports and entertainment, dental health, industrial equipment manufacturing and animal health, with an aggregate carrying value of approximately $78 million at December 31, 2023. ​ 81 Table of Contents As a holding company, Hilltop’s primary investment objectives are to support capital deployment for organic growth and to preserve capital to be deployed through acquisitions, dividend payments and potential stock repurchases.
These merchant banking activities currently include investments within various industries, including power generation, youth sports and entertainment, dental health and industrial equipment manufacturing, with an aggregate carrying value of approximately $74 million at December 31, 2024. ​ 82 Table of Contents As a holding company, Hilltop’s primary investment objectives are to support capital deployment for organic growth and to preserve capital to be deployed through acquisitions, dividend payments and potential stock repurchases.
These indicators change from time to time as the opportunities and challenges in our businesses change. ​ 63 Table of Contents Specifically, performance ratios and asset quality ratios are typically used for measuring the performance of banking and financial institutions.
These indicators change from time to time as the opportunities and challenges in our businesses change. ​ Performance ratios and asset quality ratios are typically used for measuring the performance of banking and financial institutions.
Our policies generally require that standby letter of credit arrangements contain security and debt covenants similar to those contained in loan agreements. ​ In the aggregate, the Bank had outstanding unused commitments to extend credit of $2.2 billion at December 31, 2023 and outstanding financial and performance standby letters of credit of $52.8 million at December 31, 2023. ​ 104 Table of Contents Broker-Dealer Segment ​ The Hilltop Broker-Dealers execute, settle and finance various securities transactions that may expose the Hilltop Broker-Dealers to off-balance sheet risk in the event that a customer or counterparty does not fulfill its contractual obligations.
Our policies generally require that standby letter of credit arrangements contain security and debt covenants similar to those contained in loan agreements. ​ In the aggregate, the Bank had outstanding unused commitments to extend credit of $2.0 billion at December 31, 2024 and outstanding financial and performance standby letters of credit of $61.1 million at December 31, 2024. ​ Broker-Dealer Segment ​ The Hilltop Broker-Dealers execute, settle and finance various securities transactions that may expose the Hilltop Broker-Dealers to off-balance sheet risk in the event that a customer or counterparty does not fulfill its contractual obligations.
During 2023, the provision for credit losses reflected a significant build in the allowance related to loan portfolio changes since December 31, 2022 and a deteriorating outlook for commercial real estate markets. During 2022, the provision for credit losses was driven by a deteriorating U.S. economic outlook since December 31, 2021.
During 2022, the increase in the allowance for credit losses was driven by a deteriorating U.S. economic outlook since December 31, 2021, while during 2023 the significant build in the allowance for credit losses reflected loan portfolio changes and a deteriorating outlook for commercial real estate markets.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAlso, unlike GAP analysis, simulation analysis takes into account the effect of embedded options in the securities and loan portfolios as well as any off-balance-sheet derivatives. ​ The table below shows the estimated impact of a range of changes in interest rates on net interest income and on economic value of equity for the banking segment at December 31, 2023 (dollars in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in ​ Changes in ​ ​ Changes in Interest Rates ​ Net Interest Income ​ ​ Economic Value of Equity (basis points) Amount Percent Amount Percent +200 ​ $ 36,419 9.05 % ​ $ 228,115 15.12 % +100 ​ $ 19,731 4.90 % ​ $ 139,016 9.22 % -50 ​ $ (10,352) (2.57) % ​ $ (97,002) (6.43) % -100 ​ $ (20,980) (5.21) % ​ $ (210,224) (13.94) % -200 ​ $ (43,972) (10.92) % ​ $ (455,595) (30.20) % ​ The projected changes in the table above were in compliance with established internal policy guidelines, with the exception of the estimated change in economic value of equity impact based on a -200 basis points change in interest rates which marginally exceeded management’s internal policy limit.
Biggest changeAlso, unlike GAP analysis, simulation analysis takes into account the effect of embedded options in the securities and loan portfolios as well as any off-balance sheet derivatives. ​ The table below shows the estimated impact of a range of changes in interest rates on net interest income and on economic value of equity for the banking segment (dollars in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in ​ Changes in ​ ​ Changes in ​ Interest Rates ​ Net Interest Income ​ ​ Economic Value of Equity ​ (basis points) Amount Percent Amount Percent December 31, 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ +200 ​ $ 47,270 11.49 % ​ $ 170,230 10.84 % ​ +100 ​ $ 24,101 5.86 % ​ $ 99,348 6.33 % ​ -50 ​ $ (11,409) (2.77) % ​ $ (70,531) (4.49) % ​ -100 ​ $ (21,983) (5.34) % ​ $ (149,355) (9.51) % ​ -200 ​ $ (28,730) (6.99) % ​ $ (337,987) (21.53) % December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ +200 ​ $ 36,419 ​ 9.05 % ​ $ 228,115 ​ 15.12 % ​ +100 ​ $ 19,731 ​ 4.90 % ​ $ 139,016 ​ 9.22 % ​ -50 ​ $ (10,352) ​ (2.57) % ​ $ (97,002) ​ (6.43) % ​ -100 ​ $ (20,980) ​ (5.21) % ​ $ (210,224) ​ (13.94) % ​ -200 ​ $ (43,972) ​ (10.92) % ​ $ (455,595) ​ (30.20) % ​ The projected changes in the table above were in compliance with established internal policy guidelines and are based on numerous assumptions.
To mitigate the risk of loss, we have established policies and procedures, which include guidelines on the amount of exposure to interest rate changes we are willing to accept. ​ Consolidated ​ At December 31, 2023, total debt obligations on our consolidated balance sheet, excluding short-term borrowings and unamortized debt issuance costs and premiums, were $350 million, and was all subject to fixed interest rates.
To mitigate the risk of loss, we have established policies and procedures, which include guidelines on the amount of exposure to interest rate changes we are willing to accept. ​ Consolidated ​ At December 31, 2024, total debt obligations on our consolidated balance sheet, excluding short-term borrowings and unamortized debt issuance costs and premiums, were $350 million, and was all subject to fixed interest rates.
During a period of rising interest rates, a negative GAP would tend to affect net interest income adversely, while a positive GAP would tend to result in an increase in net interest income.
During a period of falling interest rates, a negative GAP would tend to result in an increase in net interest income, while a positive GAP would tend to affect net interest income adversely.
During a period of falling interest rates, a negative GAP would tend to result in an increase in net interest income, while a positive GAP would tend to affect net interest income adversely. ​ 108 Table of Contents As illustrated in the table below, the banking segment is currently asset sensitive overall.
During a period of rising interest rates, a negative GAP would tend to affect net interest income adversely, while a positive GAP would tend to result in an increase in net interest income. ​ 109 Table of Contents As illustrated in the table below, the banking segment is currently asset sensitive overall.
No hedging strategy can protect us completely, and hedging strategies may fail because they are improperly designed, improperly executed and documented 111 Table of Contents or based on inaccurate assumptions and, as a result, could actually increase our risks and losses.
No hedging strategy can protect us completely, and hedging strategies may fail because they are improperly designed, improperly executed and documented or based on inaccurate assumptions and, as a result, could actually increase our risks and losses.
The increasing size of our MSR portfolio may increase our interest rate risk and, correspondingly, the volatility of our earnings, especially if we cannot adequately hedge the interest rate risk relating to our MSR. ​ The goal of our interest rate risk management strategy within our mortgage origination segment is not to eliminate interest rate risk, but to manage it within appropriate limits.
The MSR portfolio exposes us to interest rate risk and, correspondingly, the volatility of our earnings, especially if we cannot adequately hedge the interest rate risk relating to our MSR. ​ The goal of our interest rate risk management strategy within our mortgage origination segment is not to eliminate interest rate risk, but to manage it within appropriate limits.
Refer to the discussion in the “Banking Segment” section above that provides more details regarding sources of interest rate risk and asset/liability management policies and procedures employed to manage our interest-earning assets and interest-bearing liabilities, and potential future repositioning of our GAP position, thereby attempting to control the volatility of net interest income, without having to incur unacceptable levels of risk. ​ The table below shows the estimated impact of a range of changes in interest rates on net interest income on a consolidated basis at December 31, 2023 (dollars in thousands). ​ ​ ​ ​ ​ ​ ​ ​ Change in ​ Changes in ​ Interest Rates ​ Net Interest Income ​ (basis points) Amount Percent +200 ​ $ 50,675 11.20 % +100 ​ $ 26,814 5.92 % -50 ​ $ (13,740) (3.04) % -100 ​ $ (27,726) (6.13) % -200 ​ $ (57,406) (12.68) % ​ The projected changes in the table above were in compliance with established internal policy guidelines.
Refer to the discussion in the “Banking Segment” section above that provides more details regarding sources of interest rate risk and asset/liability management policies and procedures employed to manage our interest-earning assets and interest-bearing 112 Table of Contents liabilities, and potential future repositioning of our GAP position, thereby attempting to control the volatility of net interest income, without having to incur unacceptable levels of risk. ​ The table below shows the estimated impact of a range of changes in interest rates on net interest income on a consolidated basis (dollars in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in ​ Changes in ​ ​ Interest Rates ​ Net Interest Income ​ ​ (basis points) Amount Percent December 31, 2024 ​ ​ ​ ​ ​ ​ ​ ​ +200 ​ $ 28,818 6.56 % ​ +100 ​ $ 13,560 3.09 % ​ -50 ​ $ (26,356) (6.00) % ​ -100 ​ $ (46,457) (10.58) % ​ -200 ​ $ (59,571) (13.57) % December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ +200 ​ $ 50,675 ​ 11.20 % ​ +100 ​ $ 26,814 ​ 5.92 % ​ -50 ​ $ (13,740) ​ (3.04) % ​ -100 ​ $ (27,726) ​ (6.13) % ​ -200 ​ $ (57,406) ​ (12.68) % ​ The projected changes in the table above were in compliance with established internal policy guidelines.
An integral component of our interest rate risk management strategy is our execution of forward commitments to sell MBSs to minimize the impact on earnings resulting from significant fluctuations in the fair value of mortgage loans held for sale and IRLCs caused by changes in interest rates. ​ We have expanded, and may continue to expand, our residential mortgage servicing operations within our mortgage origination segment.
An integral component of our interest rate risk management strategy is our execution of forward commitments to sell MBSs to minimize the impact on earnings resulting from significant fluctuations in the fair value of mortgage loans held for sale and IRLCs caused by changes in interest rates. ​ As a result of our mortgage servicing business, we have a portfolio of retained MSR.
As a result of our mortgage servicing business, we have a portfolio of retained MSR. One of the principal risks associated with MSR is that in a declining interest rate environment, they will likely lose a substantial portion of their value as a result of higher than anticipated prepayments.
One of the principal risks associated with MSR is that in a declining interest rate environment, they will likely lose a substantial portion of their value as a result of higher than anticipated prepayments. Moreover, if prepayments are greater than expected, the cash we receive over the life of the mortgage loans would be reduced.
If interest rates were to increase by one eighth of one percent (0.125%), the increase in interest expense on any outstanding variable rate debt would not be expected to have a significant impact on our future consolidated earnings or cash flows. ​ As noted above within the discussion for each business segment, on a consolidated basis, our primary component of market risk is sensitivity to changes in interest rates.
If interest rates were to increase by one eighth of one percent (0.125%), the increase in interest expense on the variable rate debt would not have a significant impact on our future consolidated earnings or cash flows.
Moreover, if prepayments are greater than expected, the cash we receive over the life of the mortgage loans would be reduced. The mortgage origination segment uses derivative financial instruments, including U.S. Treasury bond futures and options, futures contracts and forward MBS commitments, as a means to mitigate market risk associated with MSR assets.
The mortgage origination segment uses derivative financial instruments, including U.S. Treasury bond futures and options, and MBS commitments, as a means to mitigate market risk associated with MSR assets.
To help mitigate net interest income spread compression between our assets and liabilities as the Federal Reserve increases interest rates, management continues to execute certain derivative trades, as either cash flow hedges or fair value hedges, that benefit the banking segment as interest rates rise.
To help mitigate net interest income spread compression between our assets and liabilities, management maintains derivative trades, as either cash flow hedges or fair value hedges, that better align repricing characteristics. Any changes in interest rates across the term structure may continue to impact net interest income and net interest margin.
Our funding sources are generally short term with interest rates that can vary daily. ​ 110 Table of Contents The following table categorizes the broker-dealer segment’s net trading securities which are subject to interest rate and market price risk (dollars in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ ​ 1 Year ​ > 1 Year ​ > 5 Years ​ ​ ​ ​ ​ ​ ​ or Less ​ to 5 Years ​ to 10 Years ​ > 10 Years ​ Total ​ Trading securities, at fair value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Municipal obligations ​ $ 5,672 ​ $ 36,163 ​ $ 46,271 ​ $ 92,784 ​ $ 180,890 ​ U.S. government and government agency obligations ​ ​ 4,124 ​ ​ 10,971 ​ ​ (7,007) ​ ​ 218,549 ​ ​ 226,637 ​ Corporate obligations ​ ​ 4,903 ​ ​ 37,895 ​ ​ 13,657 ​ ​ 19,732 ​ ​ 76,187 ​ Total debt securities ​ ​ 14,699 ​ ​ 85,029 ​ ​ 52,921 ​ ​ 331,065 ​ ​ 483,714 ​ Corporate equity securities ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ Other ​ ​ (2,662) ​ ​ — ​ ​ — ​ ​ — ​ ​ (2,662) ​ ​ ​ $ 12,037 ​ $ 85,029 ​ $ 52,921 ​ $ 331,065 ​ $ 481,052 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average yield ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Municipal obligations ​ ​ 0.51 % ​ 0.49 % ​ 1.86 % ​ 3.38 % ​ 2.43 % U.S. government and government agency obligations ​ ​ 0.42 % ​ 4.43 % ​ 3.76 % ​ 5.75 % ​ 5.49 % Corporate obligations ​ ​ 4.60 % ​ 5.68 % ​ 3.38 % ​ 3.12 % ​ 4.43 % ​ Derivatives are used to support certain customer programs and hedge our related exposure to interest rate risks. ​ Our broker-dealer segment is engaged in various brokerage and trading activities that expose us to credit risk arising from potential non-performance from counterparties, customers or issuers of securities.
Our funding sources are generally short-term with interest rates that can vary daily. ​ The following table categorizes the broker-dealer segment’s net trading securities which are subject to interest rate and market price risk (dollars in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ ​ ​ 1 Year ​ > 1 Year ​ > 5 Years ​ ​ ​ ​ ​ ​ ​ or Less ​ to 5 Years ​ to 10 Years ​ > 10 Years ​ Total ​ Trading securities, at fair value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Municipal obligations ​ $ 141 ​ $ 24,307 ​ $ 37,711 ​ $ 181,917 ​ $ 244,076 ​ U.S. government and government agency obligations ​ ​ 3,860 ​ ​ (9,740) ​ ​ (19,510) ​ ​ 156,386 ​ ​ 130,996 ​ Corporate obligations ​ ​ 15,691 ​ ​ 17,994 ​ ​ 19,180 ​ ​ 23,650 ​ ​ 76,515 ​ Total debt securities ​ ​ 19,692 ​ ​ 32,561 ​ ​ 37,381 ​ ​ 361,953 ​ ​ 451,587 ​ Corporate equity securities ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ Other ​ ​ 6,359 ​ ​ — ​ ​ — ​ ​ — ​ ​ 6,359 ​ ​ ​ $ 26,051 ​ $ 32,561 ​ $ 37,381 ​ $ 361,953 ​ $ 457,946 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average yield ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Municipal obligations ​ ​ 0.01 % ​ 4.46 % ​ 4.40 % ​ 5.10 % ​ 4.48 % U.S. government and government agency obligations ​ ​ 4.21 % ​ 4.29 % ​ 3.72 % ​ 3.39 % ​ 3.56 % Corporate obligations ​ ​ 5.20 % ​ 5.78 % ​ 4.97 % ​ 4.66 % ​ 5.08 % ​ 111 Table of Contents Derivatives are used to support certain customer programs and hedge our related exposure to interest rate risks. ​ Our broker-dealer segment is engaged in various brokerage and trading activities that expose us to credit risk arising from potential non-performance from counterparties, customers or issuers of securities.
Given projected impacts on net interest income associated with the expected transition into the next phase of the interest rate cycle, we continue to evaluate our current GAP position, which may result in a repositioning of the banking segment towards a more neutral or liability sensitive balance sheet. ​ Our portfolio includes loans that periodically reprice or mature prior to the end of an amortized term.
We continue to evaluate the interest rate risk position and may reposition the banking segment’s balance sheet in the future to better align with management’s target rate risk position. ​ Our portfolio includes loans that periodically reprice or mature prior to the end of an amortized term.
As a result, the timing and magnitude of future changes in interest rates and any runoff of deposits, and related decline in cash, may impact projected changes in net interest income as noted in the table above.
The timing and magnitude of future interest rate movements, along with changes to the balance 110 Table of Contents sheet composition, may impact projected changes in net interest income.
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Any changes in interest rates across the term structure will continue to impact net interest income and net interest margin.
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To help neutralize interest rate sensitivity, the banking segment has kept the terms of most of its borrowings under one year as shown in the following table (dollars in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ 3 Months or > 3 Months to > 1 Year to > 3 Years to ​ ​ ​ ​ ​ ​ Less ​ 1 Year ​ 3 Years ​ 5 Years ​ > 5 Years ​ Total Interest sensitive assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 4,229,642 ​ $ 1,313,646 ​ $ 1,761,407 ​ $ 640,709 ​ $ 470,810 ​ $ 8,416,214 ​ Securities ​ 455,319 ​ 184,913 ​ 422,634 ​ 318,743 ​ 910,247 ​ 2,291,856 ​ Federal funds sold and securities purchased under agreements to resell ​ 2,141,447 ​ — ​ — ​ — ​ — ​ 2,141,447 ​ Other interest sensitive assets ​ 8,495 ​ — ​ — ​ — ​ 59,569 ​ 68,064 ​ Total interest sensitive assets ​ 6,834,903 ​ 1,498,559 ​ 2,184,041 ​ 959,452 ​ 1,440,626 ​ 12,917,581 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest sensitive liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest bearing checking ​ $ 6,891,795 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 6,891,795 ​ Savings ​ 221,667 ​ — ​ — ​ — ​ — ​ 221,667 ​ Time deposits ​ 670,162 ​ 383,586 ​ 144,354 ​ 50,939 ​ — ​ 1,249,041 ​ Notes payable and other borrowings ​ 514,430 ​ — ​ — ​ — ​ — ​ 514,430 ​ Total interest sensitive liabilities ​ 8,298,054 ​ 383,586 ​ 144,354 ​ 50,939 ​ — ​ 8,876,933 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest sensitivity gap ​ $ (1,463,151) ​ $ 1,114,973 ​ $ 2,039,687 ​ $ 908,513 ​ $ 1,440,626 ​ $ 4,040,648 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cumulative interest sensitivity gap ​ $ (1,463,151) ​ $ (348,178) ​ $ 1,691,509 ​ $ 2,600,022 ​ $ 4,040,648 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of cumulative gap to total interest sensitive assets ​ (11.33) % (2.70) % 13.09 % 20.13 % 31.28 % ​ ​ ​ ​ The positive GAP in the interest rate analysis indicates that banking segment net interest income would generally rise if rates increase.
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To help neutralize interest rate sensitivity, the banking segment has kept the terms of most of its borrowings under one year as shown in the following table (dollars in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ 3 Months or > 3 Months to > 1 Year to > 3 Years to ​ ​ ​ ​ ​ ​ Less ​ 1 Year ​ 3 Years ​ 5 Years ​ > 5 Years ​ Total Interest sensitive assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 4,037,906 ​ $ 1,360,570 ​ $ 1,890,126 ​ $ 703,995 ​ $ 606,344 ​ $ 8,598,941 ​ Securities ​ 515,770 ​ 219,420 ​ 442,560 ​ 331,592 ​ 970,615 ​ 2,479,957 ​ Federal funds sold and securities purchased under agreements to resell ​ 1,661,581 ​ — ​ — ​ — ​ — ​ 1,661,581 ​ Other interest sensitive assets ​ 8,107 ​ — ​ — ​ — ​ 29,710 ​ 37,817 ​ Total interest sensitive assets ​ 6,223,364 ​ 1,579,990 ​ 2,332,686 ​ 1,035,587 ​ 1,606,669 ​ 12,778,296 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest sensitive liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest bearing checking ​ $ 6,430,544 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 6,430,544 ​ Savings ​ 259,745 ​ — ​ — ​ — ​ — ​ 259,745 ​ Time deposits ​ 615,486 ​ 552,468 ​ 44,074 ​ 52,308 ​ — ​ 1,264,336 ​ Notes payable and other borrowings ​ 459,877 ​ 91 ​ 299 ​ 403 ​ 1,729 ​ 462,399 ​ Total interest sensitive liabilities ​ 7,765,652 ​ 552,559 ​ 44,373 ​ 52,711 ​ 1,729 ​ 8,417,024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest sensitivity gap ​ $ (1,542,288) ​ $ 1,027,431 ​ $ 2,288,313 ​ $ 982,876 ​ $ 1,604,940 ​ $ 4,361,272 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cumulative interest sensitivity gap ​ $ (1,542,288) ​ $ (514,857) ​ $ 1,773,456 ​ $ 2,756,332 ​ $ 4,361,272 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of cumulative gap to total interest sensitive assets ​ (12.07) % (4.03) % 13.88 % 21.57 % 34.13 % ​ ​ ​ ​ The positive GAP in the interest rate analysis indicates that banking segment net interest income would generally rise if rates increase.
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On January 15, 2025, we redeemed our outstanding $150.0 million aggregate principal amount of Senior Notes using cash on hand. ​ As noted above within the discussion for each business segment, on a consolidated basis, our primary component of market risk is sensitivity to changes in interest rates.
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These projected changes are based on numerous assumptions. Upon implementation of pending assumption updates based on the expected transition into the next interest 109 Table of Contents rate cycle, management anticipates that over time the estimated change in economic value of equity impact will return to compliance with established internal policy limit.
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Furthermore, the projected changes in net interest income are being impacted by the heightened level of cash balances, which represent a significant portion of the Bank’s sensitivity given simulation analysis assumptions/limitations.

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